New federal regulations may have been designed to prevent young adults from piling up credit card debt, but some lenders may be circumventing those rules.
According to a report from Bloomberg, the state of New York has launched an investigation into the marketing practices of various credit card companies. Attorney general Andrew Cuomo has sent a letter to every college and university in the state and requested that they submit any exclusive contracts they have with credit and debit card companies.
Specifically, the state wants to determine whether marketers have gotten personal contact information for students without their consent, and are sending them offers that could result in their piling up credit card debt. The Bloomberg report said the state will soon begin the process of reviewing the contracts that grant lenders exclusive rights to market credit cards at a given university.
“Today’s students are facing a growing mountain of debt that can burden them long after graduation,” Cuomo said. “As the new school year begins, we want to make sure that colleges and universities are doing all that they can to help students avoid financial dangers.”
The report said Cuomo conducted a nationwide investigation in 2007 into such conflicts of interest, which specifically target college students for credit card debt. That found that payments and perks were being paid to colleges and financial aid offices. As a result, about a dozen lenders and 28 colleges cut their financial ties.
A report from Consumer Affairs said that Cuomo’s letters also included requests that schools adopt policies that would help their students avoid credit card debt. The investigation also concerns deceptive credit card marketing practices that may not spell out the dangers of accumulating a significant amount of credit card debt in a number of ways. These include solicitations at student centers, school athletic events, orientations, buildings with classrooms and other locations around campus.
The average college student now graduates into the real world with thousands of dollars in credit card debt spread across several accounts. However, provisions of the Credit Card Accountability, Responsibility and Disclosure Act now prohibit many of the practices of lenders that may have led to such situations in the past, such as banning the offering of promotional items like free t-shirts for enrolling.