Credit-card bill could hit students hardest

Consumer groups and some student activists say the reforms will be a boon to students, who often rack up unsustainable balances and fees without fully understanding the financial burdens they are taking on.

"Just because credit-card companies are taking a hit ... doesn't mean that they should be allowed to give thousands of dollars to young people with no way of paying it back," said Carmen Berkley, president of the United States Student Association, also on the teleconference on Monday.

"Of course, students still need credit cards," she said. "I myself received a credit card at 18 with a consolation prize of a T-shirt. I needed it for food, for books, for living expenses."

The shock came when she reached her credit limit and interest rates skyrocketed. "Then, I had no way of paying it back," she added.

Tessa Atkinson-Adams, a senior at the University of California, Santa Barbara, recalls seeing an invitation for free pizza at a restaurant just off campus during her sophomore year. "Credit-card companies were banned from setting up tents on any UC campus, but they found a way around it," she says.

"Turns out, you had to fill out a form to get the pizza," she says. "It was a credit-card application, and I still get e-mail almost every day from all these different credit-card companies, just because I wanted to get a free plate of pizza."

But banking groups say the legislation could wind up harming the consumers it seeks to help by reining in credit to young people who need it.

“It doesn’t strike the right balance between enhancing consumer protections and ensuring that credit cards remain available,” says Peter Garuccio, a spokesman for the American Banking Association. “Clearly, it will limit their access to credit."

It also represents government meddling, some say. “Should the government be treating you differently if you’re 20 or 22?” says Mark Calabria, director of financial regulation studies for the Cato Institute, a libertarian think tank in Washington.

“The purpose of any form of credit is to borrow against your future earnings in order to enjoy some consumption today," he adds. "Whether that consumption is in the form of textbooks or beer and pizza should be left up to the individual – we are talking about adults here – and not the state.”

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