No more free pizza for California college students who sign up for credit cards.
Lawmakers there have passed legislation, which Gov. Arnold Schwarzenegger is expected to sign, that would prohibit card companies from awarding gifts, such as pizza, T-shirts, and stuffed animals, to students who complete card applications.
The bill, which also would require schools to disclose which card companies are marketing on their campuses, would strengthen a 2001 law that directed schools only to establish policies limiting card solicitations. Consumer advocates say that law was rarely enforced.
California would be the third state this year to enact a law restricting the marketing of credit cards at colleges and universities.
Texas enacted a law that went into effect Sept. 1 instructing universities to allow card companies to offer students gifts only at specific times and places.
An Oklahoma law that took effect in July banned the selling of student information by universities to card companies for marketing purposes.
More states are considering legislation to protect students from accumulating card debt.
Some consumer advocates have been pushing for outright bans on marketing to students, but most legislative measures have stopped short of that. Instead, they have limited the ways in which card companies can market to students.
States are taking action while Congress is looking closely at business practices that have been perceived as deceptive. In House and Senate hearings this past spring, lawmakers grilled card company executives about things such as finance charges, grace periods, and disclosure notices.
The Oklahoma law, written by state Sen. Jim Reynolds, R-Oklahoma City, originally would have banned issuers from setting up shop on college campuses. However, Sen. Reynolds said the provision was dropped after the University of Oklahoma protested the ban, because it would have lost $1 million a year from its agreement with Bank of America Corp. that gave the Charlotte company the exclusive right to market its credit cards on campus.
The university also assured lawmakers that it would restrict B of A to soliciting customers during the school's athletic events — when parents, alumni, and others are in attendance, Sen. Reynolds said. However, the state did not receive such assurances from other Oklahoma schools.
The new law "is a first step," Sen. Reynolds said. Lawmakers "may consider proposing what other states have done in future sessions."
Louisiana has enacted a number of laws on the issue, including one that prohibits card companies from soliciting students on campuses during registration for classes.
The Texas law requires card companies that offer students gifts to also provide them with credit counseling. It also requires universities that allow marketing on campus to offer financial education as part of freshman orientation.
The 2001 California law directed schools to adopt policies for regulating the marketing practices of card companies on their campuses — including the prohibition of gifts in exchange for completed card applications — but the Greenlining Institute in Berkeley contends that the policies are not applied uniformly.
Besides prohibiting gifts, the new bill would require schools to disclose annually all their exclusive marketing arrangements with card companies.
"This full disclosure would enable students to determine if the school was promoting a company that had the best terms available in the marketplace," to better determine "if the school was being socially responsible," said Robert Gnaizda, the general counsel of the Greenlining Institute.
Alex Alanis, the vice president of government relations of the California Bankers Association, said that the trade group had originally opposed the measure. However, the group adopted a neutral position in June, after the state Senate amended the bill to require universities to disclose only the names of the card companies that are soliciting on campus, not their specific marketing strategies.
The California Assembly concurred with the amendment, and the bill was passed last week. The state's legislative session is scheduled to end Friday.
