Despite new, strict regulations placed on banks and credit card issuers by the United States Congress, they are fighting back by finding the loopholes in the provision. Apparently, banks are now counting loans (aka college debt) as income that can be used to justify providing a student with a credit card.
The practice of counting debt as income for college students has recently come to light thanks to Jim Hawkins, an assistant professor at the University of Houston Law Center. His report was based off of the surveys of over 500 students who attended the University of Houston and Baylor University, located in Waco, Texas. The findings? That banks are using a variety of tactics to slip past the new federal restrictions that aim to protect college students from even larger amounts of debt brought on during a time in their lives where decisions regarding credit are not made with the best judgment.
Exactly what tactics are banks using to bypass the regulation? Some tactics include mailing offers to students, offering physical or tangible gifts to potential college-aged credit card customers and even allowing individuals as young as 18 to claim any student debt or loans they have as actual income. According to Hawkins, the onslaught of credit card offers both on-campus and around campus is still going on, regardless of legislation.
Other findings in the report concluded that over seventy percent of students possessed a credit card, but approximately 85% of those students did not know their current interest rates. Majorities of these students also could not identify their cards' late fees or over limit fees. When you combine these factors, it is easy to see why nearly 90% of card-carrying college students have month to month credit card debt.
Nessa Feddis, Vice-President for the credit card industry's lobbying arm, the American Bankers Association, insists that nothing wrong is occurring. According to her, there was nothing in the CARD Act that prevented students from obtaining credit cards and as such, there is no wrong-doing on behalf of credit card issuers.