New York Attorney General Andrew Cuomo recently announced a statewide investigation into credit card marketing practices that target college students through their colleges. As part of the investigation, Cuomo sent letters to approximately 300 New York colleges and universities asking that they:

    • Submit any exclusive contracts they currently have with credit
      and debit card companies for evaluation by the AG’s office;
    • Ensure that their practices comply with the 2009 federal Credit Card Accountability, Responsibility, and Disclosure Act (Credit CARD Act) and other recent changes in federal law concerning debit cards; and
    • Educate their students about the serious consequences of credit card debt by offering financial literacy programs.

    According to the AG’s press release, banks and credit card companies target students in part because of a lack of financial savvy and a greater likelihood for the students to incur fees and penalties.

    The AG’s investigation is focused on deceptive credit card marketing practices that have targeted students, such as (i) schools, without a students’ permission, providing marketers with students’ personal contact information to allow companies to solicit students by mail, telephone and online, (ii) credit card companies bombarding students with solicitations at school events, (iii) credit card companies paying schools for exclusive marketing rights, (iv) schools receiving a percentage of finance charges assessed and (v) credit card companies luring students with free gifts and food into applying for a credit card. The AG’s office intends to evaluate the contracts gathered for problematic practices that put students at risk. Existing New York law requires colleges to prohibit on-campus credit card marketing to students, except where such marketing conforms to the college’s official credit card marketing policy. See N.Y. Educ. Law § 6437. But the AG’s office has learned that such mailing has occurred at colleges without policies.

    On September 7, 2010, the AG’s office announced that the State University of New York has agreed to adopt Attorney General Cuomo’s “Student Credit Card Reforms for Colleges and Universities.” The reforms show schools how they can protect college students from falling victim to problematic credit card marketing practices. The reforms instruct schools to (i) offer financial literacy programs, (ii) stop sharing students’ personal information with credit card companies without prior authorization, (iii) base any selection of credit card companies for exclusive agreements on the best interests of students, (iv) limit on-campus credit card marketing times and locations and monitor all credit card offers promoted on campus and (v) stop entering into any agreement with a credit card company in which the school earns a percentage of finance charges imposed on students.

    The 2009 Credit CARD Act includes provisions addressing extensions of credit to underage consumers, protection of young consumers from prescreened credit offers, issuance of credit cards to certain college students, privacy protections for college students and college credit card agreements. In addition to federal law, a number of states have laws regulating college credit cards. These laws regulate various aspects of college marketing and solicitation, including issuer registration, on-campus solicitation, gifts, financial education, disclosures and privacy.

    The New York AG’s actions serve as a reminder that scrutiny of credit card practices by federal and state agencies has not ended with the passage of recent laws and regulations. Rather, even more attention likely will be given to credit card industry practices, requiring increased vigilance on the part of credit card issuers in complying with federal and state laws.0

    • Judy Scheiderer and Margaret Stolar

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