May 15, 2001

Washington, D.C. —  Noting the rising trend of spiraling credit card debt owed by college students nationwide in recent years, Senator Chris Dodd, D-Conn., today introduced legislation that would require greater responsibility on the part of companies issuing credit cards to students and youth under age 21, providing a buffer between the aggressive marketing tactics pursued by many banks and credit card companies and the students who have not yet developed the financial skills to avoid debt.

"Much like we encourage our children who reach driving age to obtain a learner's permit and take a driver's education course to prevent automobile accidents, we should teach our younger consumers the basics of credit to avoid financial wrecks," Dodd said. "At the same time, banks and credit card companies must recognize their responsibility to the youth and students that they bombard on a daily basis with offers of credit. Far too many of these credit institutions want the profit but don't want to be held accountable for the financial havoc credit debt can wreak."

Dodd's legislation requires that when issuing credit cards to persons under the age of 21, a credit card issuer must take one of the three following steps: obtain the signature of a parent, guardian, or other qualified individual who will take financial responsibility for any credit card debt; determine that the youth has a job or other independent means of repaying such a debt; or establish that the youth has completed a certified credit counseling course. For financially inexperienced students, becoming trapped in the cycle of credit card debt can be a disastrous first step into adulthood, crippling their ability to purchase a car, obtain a mortgage, or qualify for student loans to further their education.

The bill addresses the problem of deep student debt stemming from the millions of unsolicited credit card applications that appear on the nation's college campuses every semester – applications that would extend thousands of dollars in credit to students who provide little more than a signature and a collegiate identification card. A study last year by Nellie Mae, a major New England student loan provider, found that of the 78 percent of students in the U.S. who have at least one credit card, the average balance owed is over $2,500, and that nearly one in four students with credit card debt owes more than $3,000.

One recently reported example of the kind of irresponsible approvals made by creditors cited a 3-year old who was awarded a $5,000-limit platinum credit card after his mother filled out an application on his behalf, stating "I would like a credit card to buy some toys, but I'm only 3 and my mommy says no."

Companies frequently entice students to apply for their credit cards by offering cards customized with images of a school's campus or logo, and by passing out free tee shirts, mugs, and similar merchandise for applications filled out on the spot and regardless of approval. Many colleges have lucrative contracts allowing banks and credit card providers the right to offer credit cards on their campus, or receive reimbursement on a daily basis for permitting tables or tents to be set up in areas of high student traffic. While some campuses have taken action to address the alarming rise of student debt, even banning campus marketing of credit cards in some cases, the trend of students involved with credit card debt continues to grow.

Dodd, a senior member of the Senate Banking Committee, first became aware of the often aggressive marketing and targeting of credit cards to college students during a visit to a college campus, where he noticed the prevalence of financial institutions and companies soliciting credit card applications at the school's student union.

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