The new Credit Card Act, which just came into force last week, seems to have a number of loopholes in it. Frank Curmudgeon at Bad Money Advice exposes some of these loopholes in such a way that it becomes rather obvious that the new laws may not affect the credit card industry as much as had been hoped.
While the new law was intended to provide some teeth to curb some of the excesses of the credit card companies, it seems that the loopholes may be large enough that the limitations may largely be only on paper. This means that it most likely won’t be long before the same excesses are seen – just in a slightly different way.
The example that Frank provides is rather simple but clearly illustrates the point. The law states that “No card issuer or creditor may offer to a student at an institution of higher education any tangible item to induce such student to apply for or participate in an open end consumer credit plan…”
The problem here is with the word “tangible,” Frank states. While this word obviously refers to items that can be touched or grasped, what happens if a non-tangible item is offered? Can they present to students things such as “discounts, rewards points, or promotional credit terms?” This makes it obvious that the law is very weak in defining what constitutes an offer.
Another part of the law basically states that a credit card company cannot go onto a college campus any longer, not even within 1,000 feet of it for the purpose of offering credit cards to students. This sounds like a reasonable law because the company representatives were certainly pushing their credit cards on students right on the college campuses previously. The inexperienced students, who naturally want the buying power of a credit card, are often unable to control them, and many of them end up maxxing out their cards quickly.
Once again, however, this part of the law has problems. While it does limit what credit card companies can do on campus, the law does not at all prohibit them from approaching the same college students off campus. Neither does it prohibit the sending of emails – which do not have an actual physical address, says Frank Curmudgeon.
It is rather obvious, when looked at in this light, that the new Credit Card Act looks like it may have only limited certain ways that the credit card companies can act. It has not, however, prevented them from approaching the same target group of inexperienced of college students with offers that come through other channels.