The Credit Card Authorization, Responsibility and Disclosure Act of 2009 (or Credit CARD Act) went into effect Monday as the most comprehensive credit card overhaul in United States history. Certain provisions will affect college-age students under the age of 21, as well as restrict rate increases and exploitative practices that harm a consumer’s ability to get out of debt.

The Credit CARD Act was signed into law by President Obama on May 22, 2009. The act was passed with bipartisan support in both the House of Representatives and the Senate.

College students are likely to be affected by a new provision requiring students under 21 to have a co-signer when getting a credit card. Those under 21 can only avoid this new rule by proving their income level exceeds the credit limit of the card they are signing up for.

The changes would protect younger students from the pitfalls of having their own credit cards, said Ben Woolsey, director of consumer research for CreditCards.com

‘The changes for young adults with the CARD Act might seem like a simple loss of privilege, but I think it is just a delay of access until students are better positioned to handle the responsibility,’ he said.

The legislation is purely consumer-based, meaning business credit cards and Syracuse University’s credit card system for faculty and administrators will be unaffected, said Diane DiPino, who manages the university’s official credit card program.

Half of all college students had four or more credit cards in 2008, according to a 2009 study by Sallie Mae titled ‘How Undergraduate Students Use Credit Cards.’ Ten years ago, 32 percent had that many. College-age students also have more than $3,000 in debt on average, according to the study.

The act also protects consumers from ‘common practices used by credit card issuers that are considered unfair or deceptive by the Federal Reserve,’ Woolsey said. The act helps level the playing field between consumers and card issuers, he said.

The Credit CARD Act is also meant to shield consumers from abuses like retroactive rate increases, where a credit card company could increase rates on an existing balance without forewarning. Now, they are required to give 45 days of notice before increasing rates, according to the act.

‘If you don’t like the new terms, shop around for a better deal and exercise your new right to opt out of the changes,’ said Chris Dodd, the author of the bill and Senate Banking Committee chairman, in a statement released Friday.

The Credit CARD Act is the first of an array of financial regulations that the Obama administration has been pushing for during the financial crisis. It regulates credit card usage by making the system more transparent and easy for consumers to understand.

Abuses by banks cost Americans $10 billion a year, according to the Pew Safe Credit Cards Project, which aims to raise public awareness of credit card issues and to advocate for laws to protect consumers.

‘We are shifting the balance of power back to the consumer and we are holding the credit card companies accountable,’ Obama said in a statement released Monday.

lllancia@syr.edu

Published on February 22, 2010 at 12:00 pm