Prohibits the mailing of credit card applications

Subdivision 10 states that, except as provided in subdivision 12 of this section, it shall be unlawful for any financial institution, retail merchant or other person to mail or otherwise deliver any credit card application or credit card in this state.

Subdivision 11 states that upon conviction of this section, a fine of no more than one thousand dollars per occurrence shall be imposed.

Subdivision 12 states that this section shall not apply to any credit card application or credit card when mailed or otherwise delivered either: (a) in response to a request or application for a credit card; or (b) as a replacement for a credit card previously issued to the person to whom the credit card is shipped or mailed.

Justification

Gary Blesky of "My Generation" writes, "for a generation hooked on plastic, getting into trouble with credit cards has never been easier." This problem stems from more than 3 billion offers that the industry mails out each year. They pull the consumer in with low introductory rates and then the rates skyrocket up to 19.9 percent permanently.

In 1991, the last year that America went through a recession, the country was spending 12.6 percent of its disposable income on household debt. That ratio has now been raised to 14.1 percent which is dangerously close to the 15 percent level that financial pros flag as the line between having debt and having a debt problem. This reliance on plastic is not likely to diminish now, as the economy slows and cash gets tighter.

According to Cardweb.com, Inc., an independent research firm that focuses on the payment card industry, there are currently 281 million people in the US. Approximately 185 million Americans use credit cards.

There are about 500 million consumer bank credit cards (VISA, MasterCard, Discover, and American Express) and about 700 million retail credit cards and other credit cards. With a total of 1.2 billion credit cards the average per cardholder would be 6.5 cards. Approximately only 40% of credit card accounts are paid off each month nationally. Of these credit card holders 1.3 million declared bankruptcy last year. It is easy to see why this is happening when, depending on how you calculate it, out of 110 million US households, the average debt per household is about $6000. For households with at least one credit card, the average debt per household is about $8000. Or for each credit card the average balance yearly per account is currently about $2500. The average household pays $1,000 a year in interest on credit cards, which figures out to be about $83.33 per month. These credit card companies prey on people who can least afford to use and manage credit cards; students and low-income families. The average credit card debt that a college student owes by the time they graduate is approximately $3000. According to an article published on NellieMae.com by Alan Blair, today undergraduate students are leaving school with average indebtedness of over $12,000 in federal student loans.

Daniel McGinn of Newsweek referenced a study published by the University of Michigan to illustrate the rise in consumer debt (credit card debt) among low-income families in his article titled, "Are You Maxed Out?". The study found that more than half of low-income families with high consumer debts and low net worth in 1994 were still broke in 1999. It shows that their average indebtedness grew from $2,900 to $18,500.

These statistics are a clear indication of how unsolicited credit cards applications can lead to problems. These offers are aimed to get the consumer in debt not only with one credit card, but with numerous cards carrying high annual percentage rates. This aim of this legislation is to protect the consumers who are drowning in debt.

Legislative history

2008-07 S.5177 Referred to Consumer Protection 2005-06 S.1673 Referred to Consumer Protection 2004-03 S.4055 Referred to Consumer Protection 2002 S.6060 Referred to Consumer Protection

Fiscal implications

None to the State

Effective date

This act shall take effect one hundred eighty days after it shall have become a law.