Creditors on campus

Earlier this week I posted a note from Joe Onesta about the return of 2-cycle billing, a practice that seemed to be on the wane.

Another creditor practice that's on the rise is on-campus solicitation of college students.

Some years ago I was eagerly working to help colleges in California comply with the student fincial responsibility act. One of the effects of that law was a ban on credit solicitations on campuses, but the real intent was to get more personal financial literacy education to students. The idea was that the college and the creditors would get together and present some financial education before handing a kid a credit card offer. Colleges financial aid officers I spoke to found it easier to prevent the credit card offers altogether, thereby absolving them of the responsibility to provide the education part.

It was a big story across the country for a while, with various colleges across the country opting to ban credit solicitations.

Now a few years have passed and the stories are back. Creditors worm their way back onto campuses by cutting deals with the colleges, which causes some controversy, but not as much as when the creditors offer incentives directly to students: (Chase offering free food to Ohio students who apply for credit). (Citibank offering free food to Iowa students who apply for credit)

I don't even know whose side I'm on in this. The colleges are a joke; they've lost all sense of their mission. They don't really care about protecting or educating the students, they just want their cut. For their part, the creditors are scrambling to indiscriminately sign masses of new borrowers with little or no credit history. We know where that can lead.

Comments

[Lenno]

I understand your idea here. But I have one hard question: why for the hell lending companies offer their services to those. who won't be able to deal with it. I think it's not the right way to have long and stable profits both for lenders and consumers?
And one more question - what with high school students?

[Jeff Michael]

I think the creditors are gambling that the majority of the students they sign up will eventually get their act together and be able to use credit responsibly. The idea is that they will stick with their first creditor for life, and if they've gotten themselves deep in debt to that creditor in the meantime, that's just a bonus. The race between the creditors is to be the first to give a young consumer a credit card, regardless of that student's ability to pay in the short term.