September 5, 2002

Thank you, Mr. Chairman, for holding this hearing in such a timely manner as, across our nation, students return to college campuses. The subject matter of this hearing - improving the financial literacy of our nation's youth - is an extraordinarily important one.

Many, if not most, incoming freshman are unprepared to handle the ordinary financial obligations that come as a result of entering college. For the first time, many graduating high school seniors and incoming college freshman are presented with new opportunities and confronted with difficult decisions that will affect them for the rest of their lives - particularly access to large amounts of credit, primarily through the use of credit cards. Most new students lack the financial sophistication necessary to handle the terms and conditions associated with credit card use.

Making credit available to help finance the pursuit of higher education is something we all recognize as vital. However, the aggressive marketing practices of some credit card companies and the failure to ensure that college students recognize the long-term consequences of incurring these debts is a serious and growing problem.

The fact of the matter is that financial institutions view incoming college freshman as fish in a barrel for purposes of credit card solicitations. Financial institutions have becoming more concerned with "branding" than forming responsible financial relationships with new customers. They are more interested in luring students with offers of low minimum payments, free t-shirts or other giveaways than caring about whether their prospective customers can reasonably handle their credit obligations.

The trends relating to credit card use among college students are alarming. Over 80% of undergraduates have at least one credit card. Nearly 50% of college students carry four or more credit cards. According to the Department of Education, the average balance carried by these students is more than $3,000. College students are getting into more and more debt at a faster and faster rate, and they are increasingly facing the consequences of the debt they incur as a result of the barrage of credit card solicitations. In the year 2000, 150,000 young Americans under the age of 25 filed for bankruptcy protection. In fact , the fastest group of bankruptcy filers are those people who are 25 years of age or younger. A lot of these young people have been or will be forced to drop out of school to pay their debts. And while personal responsibility is a critical component of avoiding these problems, so is corporate responsibility on the part of credit card issuers who lure students into obtaining multiple credit cards without any regard for their ability to repay a debt. That kind of corporate irresponsibility must stop.

Educators, parents, students and credit card issuers must closely examine and must address the critical need of improving the financial literacy of our nation's youth to help prevent against the rising tide of college age persons forced to declare bankruptcy.

Earlier this Congress, I introduced the "Underage Consumer Credit Protection Act of 2001." It would require that credit card issuers, prior to granting credit to persons under the age of 21, ensure that their new customers have one of the following: a co-signature of a parent, guardian, or other responsible party; an independent means of financial support for repaying the debts they incur; or the completion of a certified credit counseling course. This is modest legislation that would take a significant step toward protecting young people from those who prey on them with false promises of easy credit.

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