Legislation recently enacted in Tennessee goes further than other state laws in restricting credit card solicitations of students on college campuses, and it could create a precedent for stricter regulation of such marketing elsewhere, bankers and observers said.
Several other states have passed laws regulating some college marketing efforts — for example, by limiting when and where issuers can market their cards on campuses. Tennessee's law, which Gov. Phil Bredesen signed on May 21, bans almost all on-campus solicitations at public universities and colleges.
"We're a little disappointed, in that it goes probably further than any other state," said Timothy Amos, a senior vice president and the general counsel for the Tennessee Bankers Association. "Ours is the only one that technically says it's unlawful to solicit on campus."
Ed Mierzwinski, the consumer program director at the U.S. Public Interest Research Group, said his organization recommends that on-campus card "solicitation ought to be regulated, and gifts ought to be banned." The Tennessee law "goes further than what we are supporting," he said, though it is "still a reasoned response."
State Rep. Lois DeBerry, who introduced the legislation about 10 years ago, said it would not affect students' choices or credit options. Students get solicitations "in the mail every day," she said. Issuers "just can't do it on campus. They can't do it by offering them cheap T-shirts."
California's law, passed in September, prohibits issuers from offering such gifts to students who complete credit card applications, and it requires schools to disclose information about their exclusive contracts with issuers.
Also last year, Texas limited where and when cards can be marketed on campus, and Oklahoma banned schools from selling student information to card companies for marketing purposes. In April, Maryland enacted a law requiring issuers that market cards also to supply students with educational materials about managing credit.
Tennessee's law requires universities to give students an opt-out choice on any official form collecting personal information so that they can choose not to get solicitations from issuers.
The law does not apply to private schools, and public ones may allow card marketing on "days when there are athletic events," which presumably attract people other than students, such as parents and alumni. Existing contracts between card companies and public colleges will be allowed to run their course but cannot be renewed under the same terms.
The University of Tennessee renewed such a contract for a cobranded affinity card with JPMorgan Chase & Co. in 2006. Hank Dye, a spokesman for the university, said the contract brings in about $1.4 million a year but that the school does not expect a big impact when it expires in 2013 because students make up only about 3% of the school's roughly 28,000 affinity cardholders.
Students get "more protection and more scrutiny and more guidelines working through our program with Chase than otherwise," Mr. Dye said, because the affinity card has an initial limit of about $300 and there are opportunities for credit counseling on campus. JPMorgan Chase did not respond to requests for comment.
Scott Strumello, an associate at Auriemma Consulting Group Inc., said that, though they are "an important segment and a source of new customers" for issuers, "students are a relatively small segment of their overall acquisition efforts." But "the bigger concern for the industry is what kind of a precedent does this set?" he said. "Is it opening the doors for this kind of activity in other states?"
