One of the many things Congress attempted to do when it enacted the Card Accountability Responsibility and Disclosure Act of 2009 was protect college students from their own mistakes. Credit card companies historically marketed cards to college students because it is a lucrative market segment. They relied on several factors to improve the bottom line. First, college students are often broke and willing to use available credit. Second, they are at the point of maximum optimism about the future and are more likely to assume that that future will take care of them. And, if things go completely wrong, they are more likely to be able to tap into an outside resource (mom and dad) to make the payment.
Credit card companies can and do make a lot of money off this segment of the market. In our Randian world where the Philosophy of Objectivism is king, that should be the final answer. But Objectivism as practiced in this country has produced disastrous results. The Great Recession, from which we may or may not be emerging, was triggered by out of control lenders making loans of poor quality and then disguising those loans and selling them off to others, absorbing and then destroying capital that could have been put to more productive uses.
One of the hallmarks of being young and foolish is that you are young and foolish. It is a difficult balancing act to determine whether society in general should allow people the freedom to make mistakes and pay the consequences of those mistakes or should protect everyone from everything. We can’t have it both ways. College students will make mistakes. They always have and they always will.
Should society as a whole tolerate those who encourage kids to make mistakes? If I, as a landowner, have something on my property that I know is dangerous, but that an unsophisticated young person wouldn’t know is dangerous, I am required to take reasonable steps to make sure those young people can’t get access to it. If they do, and they get hurt, I could be held liable. This is called the “Nuisance” doctrine.
A six year old boy gets his foot crushed playing on a railroad turntable. The law says it’s the railroad’s fault and we all understand. An eighteen year old buying pizza? Maybe not so much. But how much sophistication does someone have the first time they leave home? Does the ability to get into college imply financial sophistication or an awareness of the pitfalls of credit?
Credit card companies seem to be working just as hard to sign up college kids as they did before the attempts at regulation, according to by Professor Jim Hawkins of the University of Houston Law Center. They have found new ways to get around new regulations so they can still get the same old result.
And it’s just as wrong as it ever was. Too bad for us.