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February 22, 2010: No Credit Cards for Students Under 21
Adults under the age of 21 now have a new barrier to obtaining credit; it’s called the Credit CARD Act of 2009, and it will take effect on February 22, 2010. According to the Obama administration, this new law “cleans up credit card practices for young people at universities.”
One thing the Credit CARD Act of 2009 does not take into consideration is the fact that not all young adults under the age of 21 go to college. Some young adults decide to go to work directly after high school in areas such as manufacturing, service, trucking or the military. The laws enacted to protect students from predatory credit practices on campus will also affect those who have chosen a different career path and are independent of their parents or other adults.
New Application Requirements
According to the new credit law, no consumer credit plan may be issued to or established to anyone who has not reached the age of 21 without meeting certain application requirements. (Sec. 301- HR 627-15- 8)
Adults under the age of 21 are required to have a loan cosigner who will confirm that the 21-year-old can repay debts or the cosigner will take over the debts if they are not paid. What this means is that no one under 21 can get any type of consumer loan without a cosigner willing to take responsibility.
In addition, requests to change the loan, adjust the credit rating or get an increased line of credit all need to be approved by the loan’s cosigner. (Sec 302 – 303) Young adults will also have to show the ability to repay their debts prior to getting any credit approval.
Changes on Campus
This new law has also virtually eliminated on campus lending. (Sec 304) According to this law, creditors or lenders offering open-ended consumer credit plans cannot offer these plans on campus or anywhere near campus to induce students to apply for credit—thus ending credit card tables in the cafeterias and walkways.
Colleges and universities will also be required to provide credit card and debt education and credit counseling sessions “as part of any orientation program for new students.”
What to Expect
All adults under 21 will have to have a cosigner. Bankers are also telling consumers about some potential consequences of the Credit CARD Act of 2009. Some of the things consumers can expect will directly affect adults under 21. Young adults can expect extremely low credit limits based upon their earnings. (Sec 304)
Everyone can expect interest rate hikes. Those who have not established credit or have low credit ratings can expect to have reduced credit limits or to be refused credit. Everyone should expect to pay annual fees for all credit accounts and those no-interest balance transfers will be for only preferred customers. All consumers should also expect new fees for services that are not banned by the Credit CARD Act of 2009.
