Senate Version Of Credit Card Bill Puts In Safeguards For College Students

With concern mounting over the amount of college students' credit card debt, the Senate is currently considering a bill to address this issue. 

Here is the summary from Reuters

"Senate bill - would ban issuing cards to anyone under 21 unless they show they can repay the credit extended or complete a certified financial literacy course."

CNN Money reports on the Senate bill:

"The Senate bill also prevents those under 21 from getting credit cards unless a parent or guardian backs them up or if they take a government-approved financial literacy test."

Without being specific, the CNN Money also noted that:

"Many Senate Republicans and a few Democrats have said they don't like the Senate's legislation, making passage unlikely without concessions. The sponsor, Sen. Chris Dodd, D-Conn., has said he's willing to consider some compromises."

Let's go to the legislation (S. 414):

TITLE III—PROTECTION OF YOUNG CONSUMERS
SEC. 301. EXTENSIONS OF CREDIT TO UNDERAGE CONSUMERS.

Section 127(c) of the Truth in Lending Act (15 U.S.C. 1637(c)) is amended by adding at the end the following:
(8) APPLICATIONS FROM UNDERAGE CONSUMERS.—
(A) PROHIBITION ON ISSUANCE.—No credit card may be issued to, or open end consumer credit plan established by or on behalf of, a consumer who has not attained the age o21, unless the consumer has submitted a written application to the card issuer that meets the requirements of subparagraph (B).

(B) APPLICATION REQUIREMENTS.—An application to open a credit card account by an individual who has not attained the age of 21 as of the date of submission of the application shall require— (i) the signature of the parent, legal guardian, or any other individual over the age of 21 having a means to repay debts incurred by the consumer in connection with the account, indicating joint liability for debts incurred by the consumer in connection with the account before the consumer has attained the age of 21; (ii) submission by the consumer of financial information indicating an independent means of repaying any obligation arising from the proposed extension of credit in connection with the account; or (iii) completion of a certified financial literacy or financial education course designed for young consumers.

(C) CERTIFIED FINANCIAL LITERACY OR EDUCATION COURSES FOR YOUNG CONSUMERS.—
(i) IN GENERAL.—The Secretary of the Treasury, acting through the Office of Financial Literacy and Education (in this subparagraph referred to as ‘OFE’), shall make and publish a list of all courses and
programs that have been certified for financial literacy or financial education purposes appropriate for young consumers.  When developing the certification criteria the OFE shall take into account the course or program’s— (I) proven track record in producing changed consumer behavior; and (II) use of practices or curricula that have been shown to change consumer behavior.  (ii) EXPLICIT ELIGIBILITY.—Courses taken that are offered or required by colleges, universities, and high schools may be certified by the OFE for purposes of this subparagraph, as well as other programs and courses. The OFE shall make an effort to provide certification to all types of programs and courses, including those that are conducted by nonprofit, faith-based, or for-profit institutions and State and local governments.  (iii) SELECT PROGRAMS.—From among those courses or programs that are certified by the OFE under this subparagraph, the OFE may designate a select number of programs or courses that
produce results that are far better than those produced by other certified programs as ‘highly certified’.

SEC. 302. RESTRICTIONS ON CERTAIN AFFINITY CARDS.
Section 127 of the Truth in Lending Act (15 U.S.C. 1637), as amended by this Act, is amended by adding at the end the following:  (s) RESTRICTIONS ON ISSUANCE OF AFFINITY CARDS TO STUDENTS.—No credit card account under an open end consumer credit plan may be established by an individual who has not attained the age of 21 as of the date of submission of the application pursuant to any direct or indirect agreement relating to affinity cards, as defined by the Board, between the creditor and an institution of higher education, as defined in section 101(a) of the Higher Education Act of 1965 (20 U.S.C. 1001(a)), unless the requirements of subsection (c)(8) are met with respect to the obligor.’’.

SEC. 303. PROTECTION OF YOUNG CONSUMERS FROM PRESCREENED CREDIT OFFERS.
(a) IN GENERAL.—Section 604(c)(1)(B) of the Fair Credit Reporting Act (15 U.S.C. 1681b(c)(1)(B)) is
amended—
(1) in clause (ii), by striking ‘‘and’’ at the end; and (2) in clause (iii), by striking the period at the end and inserting the following: ‘‘; and ‘‘(iv) the consumer report indicates that the consumer is age 21 or older, except that a consumer who is at least 18 years of age may elect, in accordance with subsection (e)(7), to authorize the consumer reporting agency to include the name and address of the consumer in
any list of names provided by the agency pursuant to this paragraph.’’.

(b) OPT-IN FOR YOUNG CONSUMERS.—Section 604(e) of the Fair Credit Reporting Act (15 U.S.C.
1681b(e)) is amended(1) by striking the subsection heading and inserting the following:
(e) ELECTION OF CONSUMERS REGARDING LISTS.—’’; and (2) by adding at the end the following:
(7) OPT-IN FOR UNDERAGE CONSUMERS.— (A) IN GENERAL.—A consumer who is at least 18 years of age, but has not attained his or her 21st birthday, may elect to have the name and address of the consumer included in any list provided by a consumer reporting agency under subsection (c)(1)(B) in connection with a credit or insurance transaction that is not initiated by the consumer by notifying the
agency in accordance with subparagraph (B) that the consumer consents to the use of a consumer report relating to the consumer in connection with any credit or insurance transaction that is not initiated by the consumer.  (B) MANNER OF NOTIFICATION.—An election by a consumer described in subparagraph (A) shall be in writing, using a signed notice of election form issued or made available electronically by the consumer reporting agency at the request of the consumer for purposes of
this paragraph.  (C) EFFECTIVENESS OF ELECTION.—An election by a consumer under subparagraph (A)
to be included in a list provided by a consumer reporting agency—(i) shall be effective until the earlier
of—(I) the 21st birthday of the consumer; or (II) the date on which the consumer notifies the agency, through the notification system established by the agency under paragraph (5), that theelection is no longer effective; and (ii) shall be effective with respect to each affiliate of the agency.
(D) RULE OF CONSTRUCTION.—An election by a consumer under subparagraph (A) to be included in a list provided by a consumer reporting agency may not be construed to limit the applicability of this subsection to any person age 21 or older, and the consumer may elect to be excluded from any such list after the attainment of his or her 21st birthday in the manner otherwise provided under this subsection.