05/24/2009 11:56 am ET Updated Dec 06, 2017

Credit Card Paternalism

Credit card reform is long overdue. The credit card issuers' drive for profits caused them to lose any sight of fair play. As a result cardholders have been abused for years.

And now, in an accelerated and spasmodic fashion, our leaders have delivered us from credit card hell by enacting a new law: The Credit Cardholders Bill of Rights.

Today's posting is about one provision in this new law: a section of nutty lawmaking that makes it harder for anyone under the age of 21 to get a credit card. The new law prohibits card companies from issuing cards to "youngsters" without parental approval or a determination of the prospective cardholder's financial wherewithal. This law will seriously impact the ability of college students (not working) to get credit cards until their senior year.

To me this kind of paternalism is ridiculous. Our young adults can vote, serve in the military and consume alcohol or tobacco. But, they are not capable of fighting off credit cards?

Yes, some young people get into trouble with credit cards. But, there are also many college students who use the convenience of credit cards responsibly. And, here's a crazy idea: how about our institutions of higher learning spending a little bit of time and energy educating young adults about the potential use and abuse of credit cards!!

By delaying the issuance of credit cards to young adults, we are not helping them. In fact, we are making it harder for them to build up a credit history and favorable credit score. We are impinging on their ability to access the convenience of cards and we are tying them to their parents' finances for periods beyond reason.

Some of the other provisions of the new law are also paternalistic (no late fees unless cardholders say they want overdraft protection) but at least understandable. This age requirement, however, is to me an example of how our leaders never seem to act quickly enough and then when they do get around to acting, make up for lost time by going way too far.

Jim Randel
is the author of The Skinny on Credit Cards: How to Master the Credit Card Game (RAND, 2009).