Credit unions that serve university students report that the latest round of credit card regulations will likely restrict the number of student members who will able to get cards.
Prior to the Credit Card Accountability, Responsibility and Disclosure Act that was enacted law last year, the credit unions reported that they would offer credit cards with low credit limits uniformly to students, including incoming freshmen. The low limit made them very low risk for both the student and the credit union and allowed the student to begin to build credit history, the credit unions reported. But the new law cuts off many students from this sort of card program.
Ironically, the CUs point out that their card programs for students were exactly the kind most card reformers would approve.
For example, the $90 million Florida State University Credit Union had a structured student card program designed to both educate students about the proper use of credit and encourage them to build their credit skills. Under the terms of the program, incoming freshmen credit union members with no credit history could receive a credit card with a limit of $500. Then, as long as the student kept up with payments and used the card responsibly, every August the credit limit would rise by $500 until, by senior year, the student would have a limit of $2,000.
"We never had the big promotions with the T-shirts and all of that," said Harmony Nagy, marketing director for the FSU Credit Union. "We have a credit card program that helps our student members. Now we're going to completely revamp it."
The new law forces a change because it forbids credit cards offers to people under age 21 without an adult co-signer. Further, college students over age 21 have to meet the usual underwriting criteria, which usually means having a job.
Nagy contended that the credit union has a strong card product that could withstand the scrutiny of any college freshman's concerned parents asked to co-sign the credit application, "but the problem is getting in front of the parent," she said.
The $14 million New York University Federal Credit Union reported that its student card program would not face much impact from the new law-primarily because the CU already asked for a co-signer for student cards. Like FSU CU, the NYU FCU also plays a role in financial education for students and the credit card is a tool for proper credit education. "I did 23 student seminars on financial education as part of last year's fall orientation," said Mira Ness, NYU FCU CEO. "And this year I will do 10 more."
Tom Mantilli, vice president of marketing for the $324 million Harvard University Credit Union, said the CU will have its student interns this summer look at its student card program and recommend changes.
Mantilli said the CU, which has roughly 4,200 credit card accounts with roughly $11.5 million in available balances, actively promoted the card to its student members at both the undergraduate and graduate levels.
"The graduate students are likely not going to be impacted by the changes since they are older and often have jobs already," Mantilli said. "The change will likely have much more of an impact on undergraduates, especially those who don't have parents who can easily co-sign."
"We have a lot of undergraduates from overseas," Mantilli said. "Those are the people who this is really going to hurt because they will not be able to easily get a co-signer."