The Credit Card Accountability Responsibility and Disclosure Act of 2009
Credit Card Debt for Young Consumers
New credit card law allows parents to control credit issued to their children
One section of the new credit card law is aimed at keeping young people out of debt. Parents now have greater power over the credit given to their children.
The Credit Card Accountability, Responsibility and Disclosure Act prohibits credit card issuers from extending credit to a person under
21 unless one of two conditions is met.
Under one condition: the card issuer has to verify that a young adult has the “independent” financial means to repay any credit that has been extended. This should have always been the case, yet as we know, the lenders have given credit to teens living off student loans or side jobs, counting on parents to bail them out from under the accumulated debt.
Under a second condition: a young person will now need a parent, legal guardian, or individual 21 or older to co-sign a credit application. A common misconception is that a co-signer is responsible for only half the debt. A co-signer is in fact fully responsible for all the debt.
There should be no rush to get a young adult a credit card. An often used excuse is that helping a young person obtain a credit card, helps them to start establishing credit, and teaches them how to use credit responsibly. These are ideas make popular by the credit card companies. Teaching a young person to buy something when, and only when, they have the money to pay for it is the only way to teach them to live within their budget.
Listed below are a few other provisions in the new law that help guard against credit issuers praying on young people.
- Gifts to college students in exchange for filling out a credit card application are prohibited.
- Issuers can’t send pre-screened offers to people under 21 unless the consumers have consented to receive these offers.
- The law bans card issuers from raising the credit limit on accounts held by a person under 21 unless the co-signer gives written permission.
This new law is a step in the right direction, and the power it gives parents is the best part. However, standing strong and refusing to co-sign is key. Co-signing for a credit card is a very dangerous thing to do. Attaching yourself to the way anyone else pays their bills can only hurt your credit, and the debt young adult across the country are dealing with, shows that it causes them more harm than good.
Extra Resources
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I completely agree! I wish they would have had these safe guards in place when I obtained my first credit card…I bet I wouldn't have any debt right now…
21 to drink, 21 to charge. USA BABY!
Whoop, There it is.
I bet everyone feels the same way. By the time I was 21 I had at least 5 credit cards..
Good developments, we get so smart during a recession!
I bet everyone feels the same way. By the time I was 21 I had at least 5 credit cards..
Good developments, we get so smart during a recession!