US Credit Card Act disadvantages under 21s
It’s an opportunity for prepaid, says CEO
An unexpected consequence of the new US Credit Card Accountability, Responsibility and Disclosure Act is that under 21s will need a co-sighner before being extended credit, and will be forced to better document how they will be paying any balance. Any credit line increases will have to b e approved by the co-sighner.
According to Jerry R. Welch, CEO of nFinanSe, the new act, while trying to protect the most vulnerable among the population, has also effectively cut off a wide swathe of young people from making electronic payments, especially online shopping.
Welch argues that while cracking down on rate increases, eliminating certain tricky practices, improving transparency and protects arguably the most vulnerable among us it is discriminating against millions of Americans on the grounds of age alone.
He said: “Even if a young person has clearly shown the ability to make timely payments and demonstrated they are more than capable of informed use of their account, they will still be required to keep a cosigner involved in the ongoing management of their finances. ??The net result of the above is that millions of young Americans simply won’t be able to get a credit card at all because of the new restrictions. That’s a problem in a country where electronic payments are ubiquitous, touches every part of our lives and is even mandatory for participation in the fastest growing area of retailing – online shopping.”
As a provider of prepaid cards, Welch is, of course, promoting prepaid products, that can’t get overdrawn, yet function as other payment cards, and in fact debit cards.
He said: “Even before the recession, general purpose reloadable prepaid cards were already used by many of the more than 73 million unbanked and under banked consumers in this country as a low-cost alternative to a traditional bank account. Dwindling credit card limits have led millions more to use reloadable prepaid cards as consumers continue to scramble for alternatives. The new credit restrictions on young people will help significantly increase the number of those who make prepaid their No. 1 option to fill the burgeoning “plastic gap.” In 2008, transactions on reloadable prepaid cards totaled more than $4 billion, and forecast