Truth About Credit In The News

 When the credit-card bill comes, you pay it off in full, right? Of course you do. It's not like you look at your line of credit and rub your tummy craving a bigger number.

But in case you are an average college student with a credit-card debt of over $2,000, let me introduce you to Mr. Money.

"Hello, I'm Mr. Money," opens the 1947 tutorial titled "Wise Use of Credit." "People can't seem to get enough of me as either cash or credit."

Mr. Money is one of the stars in James Scurlock's 2006 documentary "Maxed Out," an exposé on credit-card companies and the consumers they target. Americans for Fairness in Lending and the Ohio Public Interest Research Group screened the movie in Baker Center Thursday night as part of their presentation, "The Truth About Credit Cards."

"Well, there's sure a lot of things that I'd like to buy for better living," said John, one of the two high-school students Mr. Money teaches in the tutorial. "How about giving me a little credit?"

"Nobody gives you credit, John, it's something you'll have to earn," replies a stern Mr. Money.

How one earns credit, Mr. Money explains, is with the three "C"s - character, capacity to repay debt and capital to support debt, such as a house against a mortgage.

In case you haven't been paying attention to recent events dubbed The Credit Crisis, the problem has been that banks didn't require borrowers to have any of the three "C"s. People took on housing loans and credit-card debt they couldn't repay. Purchasing and distributing those debts became a hot commodity on Wall Street. And now terms like bailout and stimulus are as familiar to American families as apple pie and hot dogs.

"The thing about credit cards is they can change the rules at any time without any reason," said Sarah Byrnes, campaign manager for the Americans for Fairness in Lending. "That means if you pick a really good card, overnight it can become a really bad card."

The AFFIL is a nonprofit organization working to reform the lending industry. The organization resulted from consumer-advocacy groups concerned about the lending industry, not just credit cards. On its Web site, the group outlines six principles of fairness in lending - responsibility, justice, equality, information, accountability and law.

Byrnes's presentation and Scrulock's documentary focused on responsibility. "Maxed Out" put faces on credit-card debt. It chronicled the lives of several families, who couldn't resist high credit limits. The average American family collects $9,000 in debt per year and spends $1,300 per year on interest payments, according to the film.

"If I read the fine print, they were right," said the 57-year-old widow in the film while fighting back tears. "I did sign my life away."

Closer to home for college students, two mothers appear in the film to tell the stories of their children, two college students who became so buried in debt they decided to commit suicide.

Credit-card companies will target students because they fall into the most profitable category - spenders without a means to make full payments. The banks will come to campuses to sign up students, tempting them with a free sandwich at a sub shop or a free T-shirt like the booth at Oklahoma University, featured in the film. For allowing the company to set up on campus, Oklahoma got $13 million, according to the film.

"I just learned that my university sells my information to credit-card companies," said Lizzy Kozak, a campus organizer for the Ohio Public Interest Research Group, a state-based advocacy group that stands up for the public against special-interest groups.

Kozak, a recent graduate of Northwestern, works out of Oberlin College. She was at OU last Thursday for the presentation and to set up tables for FEESA, PIRG's national counter-market campaign against credit-card companies.

OU Media Relations had not commented on the university's stance on permitting credit card companies on campus as of press time. But the university does have an agreement with Bank of America.
"We do mailings to our alumni of all ages," said Connie Romine, OU associate executive director of Alumni Relations. "Our agreement provides Bank of America with marketing, but we do not give out contact information."

OU Alumni Relations includes in its newsletters information about Bank of America. If alumni sign up for their credit card, the university receives remuneration.

Last April, The NEWS published a story about OU students and credit cards. At the time, a spokesman in the Office of Student Affairs said the university provides information on credit cards at Pre-College freshman orientation, and that OU realizes it's illegal to solicit credit cards on college campuses. "We do chase them off campus quite a bit," she said.

IN 2008, PIRG RELEASED a report titled "Characteristics of Fair Campus Credit Cards."
"Young people, including traditionally-aged college students, have certain financial characteristics that make them different from other adult targets of the credit card industry," the report states.

One of the credit practices that the report deems unfair for college students is universal default. A company will impose an interest-rate penalty when a consumer allegedly misses any payment to any creditor, whether it's another credit card, a car loan or a utility bill.

Essentially, the credit industry has strayed away from what Mr. Money preached. But there is legislation to limit what credit companies can do.

In September 2008, the Credit Cardholders Bill of Rights Act passed through the U.S. House of Representatives. But then came the financial crash and Congress had to act fast to save those lending institutions.  Brynes said she expects the legislation to be reintroduced in the House again after the national stimulus package is finalized (because the legislation never became law, it has to be re-voted on in the new Congress).

The CCBR Act would limit when a creditor can increase a consumer's annual percentage rate of interest (APR). It would also prohibit finance charges and force credit-card companies to report income derived by credit-card operations.

Want more information on credit cards? Visit the Athens $timulus blog.