As millions of students head to college over the next few weeks, credit card issuers will be making some of their last pitches to these potential cardholders before a new law severely restricts such business.

Student credit cards have long been a favorite, if controversial, way for issuers to acquire customers at the beginning of their financial lives. Affinity relationships with schools and alumni associations have also proven lucrative. But by February the opportunities will be severely narrowed by the Credit Card Accountability, Responsibility and Disclosure Act, which will restrict the industry's ability to market or issue cards to anyone under the age of 21.

"For this class of people, people under the age of 21, creditors are going to have to have a different structure" to process applications, said David Thompson, a member in the Cleveland office of the law firm McGlinchey Stafford PLLC and a former counsel for Fleet Financial Group Inc.

Or no structure at all. Issuers "try to make things as streamlined and consistent as possible … and I don't think many issuers are going to show a great deal of patience" for adding separate procedures for a subset of applicants, Thompson said. Hence, the lenders may be "disinclined from extending credit to this class of people," he said.

Most major issuers would not discuss their specific plans for compliance with the law's restrictions on issuing cards to those under age 21. But Nessa Feddis, a senior federal counsel for the American Bankers Association, predicted that compliance will be too expensive and difficult for some companies to continue issuing cards — on campus or off — to any young consumers.

"There may be some banks that will decide that the compliance challenges and burdens outweigh the number of cards that they issue to people under 21," Feddis said. "I think that many students still will be able to obtain cards, but they may not have as many choices, and some students may not be able to get a credit card."

Most card companies have already started making some changes to other practices in anticipation of the law or its effects. American Express Co. and Discover Financial Services, for example, said this month that they would discontinue the widespread practice of charging overlimit fees rather than comply with the law's expensive new "opt-in" requirement for such fees. Aug. 20 was the deadline for some of the law's other requirements, including a 45-day notification of interest rate increases and a 21-day grace period between when a statement is mailed and when it is due.

But so far, while several issuers (Discover, Amex and Capital One Financial Corp.) said that they do not market on-campus, none have taken the lead to pull back from lending to consumers under 21.

Feddis and others attributed this hesitation to a clause in the new law that requires further rulemaking from the Federal Reserve. The law requires anyone applying for a credit card while under the age of 21 to have either a legal adult co-sign the application, or to prove they can handle the debt themselves. She said the Fed is expected to issue rules by November defining that "independent means of repaying."

Young consumers, who usually have thin credit histories and receive small initial credit lines, make up a small part of issuers' business. For the past 18 months, consumers between the ages of 18 and 25 have received a scant 1% of all credit card acquisition direct mail sent to the households tracked by Mintel International Group Ltd., according to Andrew Davidson, a senior vice president.

But even for issuers that do not market their cards on campuses, college provides one of the best opportunities to acquire and develop a business relationship with new consumers.

The law's impact, "from a portfolio size perspective, is perhaps not very material," said Gaurav Gupta, a director of the consumer lending and payments practice at Novantas LLC and former executive in charge of Capital One's young-adult cards. "But some issuers think of it from a strategic point of view. Giving a student card is an opportunity to initiate a financial relationship — that's a new population coming into the pool."

Once that opportunity is taken away, how to reach large groups of new consumers is "a million-dollar question," he said. "And it goes beyond the student card. The question applies to the entire population" as issuers retrench amid the recession.

The law will also restrict the ways in which issuers may market their cards on or near campuses. For example, it will forbid the offering of "tangible items" — such as the free pizzas or T-shirts that many card companies have long used to market their cards on campus or at sporting events and other school functions. Those types of promotions have been long criticized by consumer advocates, and several states have passed laws prohibiting them.

But until February, some industry members expect to see issuers conduct business as usual when marketing and issuing to students — if not accelerating their efforts.

"It's overly dramatic to say card issuers are going to be preying on our students because this is our last free-for-all, but I do think there's going to be more aggressive marketing" this fall, said Curtis Arnold, the founder of QuinStreet Inc.'s

Thompson of McGlinchey Stafford disagreed. "There's not too many people pursuing originations in the economy we find ourselves in right now," he said. "I'd be surprised if there are many issuers who are aggressively pursuing a section of the market that's going to be more heavily regulated than all the others."

But he and Arnold agreed that after the law goes into effect, "some issuers will pull up stakes," as Arnold put it. "Starting in the spring, the market will be falling off."

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