Campus stalker rapes students of their financial dignity: a review and strategic ethical framework for credit card company marketing practices.

Askim, Mary K. ; Bateman, Connie R.

ABSTRACT

This manuscript identifies the realities and risk factors faced by marketing managers of credit card companies and urges them to consider the role of consumer sovereignty in the design and delivery of ethical marketing programs. The inherent risks of targeting to the college student market are discussed as they relate to legal standards and consumer sovereignty status. A theoretical framework is presented for marketing program risk assessment and a marketing program risk assessment tool is given to help marketing managers see their marketing programs from an ethical and risk minimizing perspective. The premise of this paper revolves around the importance of establishing the nature and degree of consumer sovereignty present in any target market before (re)designing and implementing marketing strategies geared to it. Assessing the level and nature of consumer sovereignty is paramount to the ultimate design and risk minimization of ethical marketing strategies. The risk assessment tool provided may help marketing managers prioritize the type of information to be gleaned from the college student market and in the subsequent provision of appropriately thought out strategies, avoid costly lawsuits and negative publicity in the future.

INTRODUCTION

As Jeff passes by the MBNA Career Center on campus, which is named after the credit card company that he owes several thousand dollars, the irony of his "catch-22" situation is not lost on him, "how can I pay them back when their credit reports are hurting my chances of getting a good job!" It is not surprising that growing numbers of students like Jeff are increasingly using sexual analogies in describing their unforeseen circumstances, denouncing the predatory policies of the credit card industry as a form of "financial rape."

Significantly, the most striking feature of the ongoing furor over predatory marketing to college and high school students has been the adamant refusal of the credit card industry to publicly acknowledge any culpability. (Manning, 1999a)

Profound changes have occurred in the credit card industry since its deregulation in the late 1980s. These changes have been enhanced by the technological advancements of the 1990s, enabling easier access and response to the consumer markets. As a result, with more lenders entering the credit market, the credit card industry has become a very profitable and yet, increasingly competitive environment leading to a saturation of the traditional target markets. The saturation of these traditional target markets has led to identifying the students market, college and high school students, as the last untapped segment which holds promise for sustaining the profitability of credit card issuers.

The competitive arena that credit card issuers have found themselves in, both in the traditional and nontraditional markets, has spurred these marketing reactions: (1) heavily stimulating the uses of cards such as by encouraging cardholders to use them to pay for groceries and other basic necessities; (2) suspending the traditional criteria for cardholders and offering large amounts of easy credit to college students who have no credit experience or familiarity with the credit world; (3) adjusting downward the minimum monthly payments (e.g., 2.0 percent, 2.5 percent); (4) lowering minimum monthly payments and not indicating the consequences of making minimum payments; (5) encouraging college students to apply for and use credit lines that are beyond their ability to pay; (6) offering pre-approved credit cards to students without establishing pre-approval status; (7) offering premiums, discounts, and promotions to sign up for or use a credit card; (8) establishing credit limits that exceed the student's monthly income; (9) approving credit limits without considering how much is owed on currently held cards and its relationship to their monthly income; and (10) not clearly informing the cardholder of the total finance charges if minimum payments are made or a payment is made late (Committee on Banking and Finance and Urban Affairs, 1995).

From the marketing manager's perspective, these strategies are intended to create and keep a customer. Whoever is able to provide students with their first credit card, often remains a loyal provider for an average of 12-15 years (Hultgren, 1998). The first in the pocketbook has a greater chance of remaining in the pocketbook. That creates a competitive edge when dealing with a market that has higher than average lifetime earnings and is beginning a transition period related to their purchasing behaviors (Warwick & Mansfield, 2000).

Marketing managers of leading credit cards companies in America today face what seems to be an almost insurmountable dilemma, balancing the corporate interests (market share and profit) against the interests of customers (trust, honesty, fairness, and satisfaction). In other words, weighing the consumer sovereignty assumption behind truly ethical marketing strategies against the monster profit motive.

This manuscript identifies the realities and risk factors faced by marketing managers of credit card companies and urges them to consider the role of consumer sovereignty in the design and delivery of ethical marketing programs. The inherent risks of targeting to the college student market are discussed as they relate to legal standards and consumer sovereignty status. A theoretical framework is presented for marketing program risk assessment and a marketing program risk assessment tool is given to help marketing managers see their marketing programs from an ethical and risk minimizing perspective. The premise of this paper revolves around the importance of establishing the nature and degree of consumer sovereignty present in any target market before (re)designing and implementing marketing strategies geared to it. Assessing the level and nature of consumer sovereignty is paramount to the ultimate design and risk minimization of ethical marketing strategies. The risk assessment tool provided may help marketing managers prioritize the type of information to be gleaned from the college student market and in the subsequent provision of appropriately thought out strategies, avoid costly lawsuits and negative publicity in the future.

THE TARGETED MARKET-COLLEGE STUDENTS

Traditional consumer markets are saturated, so the need is present to search out new markets. The credit card industry has done just that--the new market, college students. What makes this group such a viable segment? It meets the criteria for forming prospective buyers into segments-size, purchasing power, similar needs, reachability, and responsiveness to marketing (Berkowitz, Kerin, Hartley, & Rudelius, 2000).

In 1998, there were more than 14 million students enrolled in U.S. colleges and universities, with enrollment expected to reach 16 million by 2007 (U.S. Department of Education, 2001); its size is large enough to be potentially profitable. The students market spends billions each year on consumer goods, $60 billion in 1994 (Committee on Banking, Finance and Urban Affairs, 1995) and estimated at more than $90 billion by Campus Concepts, a marketing and advertising firm specializing in colleges (Kessler, 1998). The real strength of this segment is the potential lifetime earnings of students having college degrees and the fact that they are at a stage in their lives that denotes a transition period related to their purchasing behaviors (Warwick & Mansfield, 2000). Because of these factors, adequate purchasing power is present. College students represent a market that has similar needs. These needs focus on college tuition and related expenses, living expenses, and the social demands that must be satisfied (e.g., the needed spring break trip to Europe or Cancun). Estimates for such essential purchases as rent, food, gas, car, insurance, tuition, and books represent $23 billion in spending and the nonessential pizza money, $7 billion (Ring, 1997). Concerning the reachability criterion, campuses provide the optimum locations, the segment is concentrated and captive to the promotional efforts of credit card marketers. Lastly, students within the segment are responsive to marketing efforts. This is evident by the fact that 81.0 percent of college students had their first credit card by the end of their freshman year (Consumer Federation of America, 1999).

While just over a decade ago, few credit card issuers saw this group as a potential customer base; card issuers are now competing intensely for their business. Forty of the top 50 card issuers, and approximately 65 of the top 100 are competing for a presence in their wallets (Ring, 1997). Parents, generally, are not concerned that their students are being targeted. In a national survey, the overwhelming majority of parents thought credit cards offered good benefits to the student. Of the parents who had children under the age of 18 years, 88.0 percent thought that credit cards helped college students establish credit, and 82.0 percent believed that they offered a means to learn about financial responsibility (Newton, 1998).

Various data can be found relating to the ownership and usage of credit cards by college students. Data vary depending on the population, sample, data collection, and study period. A composite is provided by the United States General Accounting Office (GAO) Report to Congressional Requesters (2001) that compares the data from three major studies that were done in 1998 and 2000. These include Student Monitor (a marketing research firm), The Education Resources Institute and Institute for Higher Education Policy (TERI/IHEP; nonprofit, nonpartisan groups), and the Nellie Mae Corporation (a national provider of higher education loans for students and parents). The Student Monitor and TERI/IHEP studies were based on random, statistically valid samples of larger and broadly defined populations of U.S. college students; the surveys relied on self-reporting. The Nellie Mae study was based on credit reports of students who applied for a certain type of private loan; representing a self-selection bias, but not a self-reporting bias. Collectively, a profile is presented.

Almost two-thirds of college students have at least one credit card in their name (the Nellie Mae study found that percentage to be higher, at 78.0 percent). The majority of this group has only one card, but there are sizable groups that have multiple cards, with three cards being the average number reported in the Nellie Mae study. There is a broad distribution of credit limits with those cards, ranging from limits of $1,000 to $5,000 or more; most had combined limits of less than $3,000. Roughly 10.0 percent were unaware of what their credit limits were. The "don't know" categories indicate the vulnerability of the college student market. The data represents a quantitative measure showing lack of consumer sovereignty, or in other words, showing a marketing manager that there is significant threats posed by consumer sovereignty.

The Student Monitor sample charged an average of $127 a month. Those carrying credit balances (42.0 percent of the sample) had an average debt of $577, and 16.0 percent had a credit card debt of over $1,000. Over three-fourths of the TERI/IHEP sample (who carry a balance) had average monthly balances of $1,000 or less. The Nellie Mae study reported higher debt balances. The average credit card debt was $2,748 and the median card debt was $1,236. Thirteen percent had balances of $3,000 to $7,000 and nine percent had balances of $7,000 or more. The Nellie Mae study found that the average credit card debt was up 46.0 percent from 1998, and other data indicate the average credit card debt among students is up 100.0 percent from 1993 (Hoover, 2001).

Students received their credit cards through a variety of sources. Many came to campus already possessing a credit card (range of 25.0 to 34.0 percent of the students); but generally half of them acquired their first card in their first year of college. Slightly over one-third of the Student Monitor and TERI/IHEP samples acquired their cards through mail solicitations. Almost one-fourth of them received their cards through an on-campus representative (e.g., tabling) or advertisement (e.g., college publication or stuffers in a college bookstore bag).

The majority of college students are deemed as being responsible in their use of credit cards. Credit cards offer resources in case of emergencies, can provide a financial record of spending for students and their parents, provide some financial security or protection because of liability limits for fraudulent or unauthorized charges, and provide interest free use of money until payment is due. Students generally make use of these advantages and are accountable for their credit card usage. They make fewer late payments than the older population. Cardholders between the ages of 35 to 44 years account for the largest proportion of overdue payments, 29.0 percent; while those between the ages of 18 and 24 years account for only 18.0 percent (Newton, 1998).

Though credit cards can provide a learning ground for future short-term and long-term credit for these individuals, what is being learned sometimes can't be classified as being positive learning. "Is it OK to pay my Visa with my MasterCard?" (Souccar, 1998); referring to a $4,500 Rolex watch, "I had never had debt until I was Miss Smartypants and decided to get that watch." (Schembari, 2000); "It was just ignorance. Even though I had a job I couldn't meet my expenses and pay off the cards. If you fall one month behind, it takes three months to catch up." (Schembari, 2000).

Recognizing the fact that the usage of credit is the responsibility of both the consumer and the creditor, are credit card issuers providing the needed information to the college student market in order for them to make responsible decisions? Does this unsophisticated market represent a cash cow to the credit industry? "It's a dangerous situation when the banks know exactly what they are doing, and students don't have a clue" (Hoover, 2001). The vulnerability of this market provides an ethical dilemma for the marketing manager. What follows will identify the realities and risk factors for the marketing managers of credit card companies to consider in designing, or redesigning, marketing programs to the college market. What should be avoided is consumer response similar to this comment 3/4 "I've learned my lesson, although I certainly never expected to have two educations. One came from school, and the other came from my wallet" (Hoover, 2001).

THEORETICAL FRAMEWORK FOR MARKETING PROGRAM RISK ASSESSMENT

Marketing managers whose clear directive has been to penetrate and develop the students credit card market are increasingly faced with ethical hurdles, as the students want the right to use credit cards but are hard-pressed to shoulder the responsibilities required to manage debt loads effectively. As if it weren't enough that the strategic future is belayed with such obstacles, the playing field itself is a literal minefield of explosive lawsuits, bankruptcies, legal standards, university policies, consumer rights activists, and stories of personal tragedy. Marketing managers historically faced with the seemingly opposing balance between the pursuit of corporate interest and consumer interest, have reported feelings of extreme ethical conflict (Chonko & Hunt, 1985).

The source of the conflict is confusion about how to assess whether there is or is not an appropriate and effective balance between producer and consumer interests, and how to know whether marketing practices and programs are ethical. Research on marketing managers and ethics reveals that a foremost question asked is, "How do I know that my marketing strategies are ethical?" (Smith, 1993). The answer to this question lies first in the determination of whether marketing strategies comply with legal standards, and secondly, in the assessment of consumer sovereignty. Consumer sovereignty assessment involves a determination of the vulnerability of the consumers, their ability to assess the availability and quality of information present in the marketplace, and their ability to make educated choices among alternatives in the marketplace (Smith, 1993).

The theoretical framework guiding the development of the marketing program risk assessment tool is presented in Figure 1. The framework shows a continuum between caveat emptor and caveat venditor philosophies on which marketing programs are positioned; appropriate and ethical positioning would be determined by an assessment of consumer sovereignty. A brief description of each theoretical component and a general description of how it relates to the credit card students market follows.

[FIGURE 1 OMITTED]

The assessment of consumer sovereignty is essentially a tool for managers to determine whether current strategies should remain status quo or should be changed to better prioritize producer or consumer interests. If consumer sovereignty is not present or lacking, then marketing strategies should be changed to accommodate vulnerabilities in the consumer market, provide access to quality information, or facilitate choices and comparison shopping (a movement toward caveat venditor). On the other hand, if consumer sovereignty is present, then current marketing programs may remain (caveat emptor).

Caveat Emptor

Caveat emptor or 'let the buyer beware' philosophy exists among management when the producer's or company's interests are prioritized over those of the consumer. Typically, when caveat emptor philosophies are held by marketing managers, marketing programs are comprised of strategies that (1) fall short of or meet legal standards, (2) minimize expenditures, or (3) are deemed 'ethical' when they meet the letter of the law.

In the credit card industry, many issuers hold a caveat emptor philosophy and prioritize their interests of profit maximization over those in the best interest of the student consumer. This has led to what issuers may call brilliant marketing programs producing heightened profitability, in spite of serious accusations of unethical and irresponsible marketplace behavior. This paper will later discuss credit card marketing programs that reflect a caveat emptor philosophy. These programs are clearly the result of a thorough understanding of the student psyche and are designed to influence, persuade, and modify purchase behaviors through short-term reinforcement while setting the stage for long-term punishment. The realities of the caveat emptor marketplace exist in the power of the corporation to influence consumers and to manipulate consumer response (Galbraith, 1984). The responsibility for ensuring whether ethical standards of behavior are met will ultimately lie with the consumer; as the consumers experience dissatisfaction and unrest in the marketplace, they must let their voices be heard by corporate America in order to improve the standards of ethical behavior in a market based on caveat emptor strategies.

Caveat Venditor

Caveat venditor or 'let the vendor beware' philosophy occurs when a company puts the consumers' best interests over its own desire for profit maximization. This philosophy often is born out of marketing strategies developed in response to (1) a significant threat of legal retaliation or consumer unrest, (2) a strong desire to invest in preventative strategies, or (3) a concerted effort to establish ethical programs by meeting or exceeding consumer needs.

A number of credit card issuers have adopted a caveat venditor philosophy and not only complied with legal standards for the industry, but have gone beyond the letter of the law and made significant investments in educational and supportive training programs and materials for the students market. These other-centered market initiatives, although virtuous by comparison to their caveat emptor counterpart, have somehow fallen short of marketing manager expectations. In spite of valiant financial efforts by credit card marketers to avoid lawsuits and consumer unrest, both still are plentiful in the marketplace. This paper will later discuss credit card marketing programs that reflect a caveat venditor philosophy. These programs run the risk of over-investment in ineffective educational tools because their inherent success is dependent upon a consumer marketplace that wants to be responsible.

Consumer Sovereignty

The consumer sovereignty of a target market exists to various degrees, depending upon the vulnerable nature of the consumer, their ability to assess the availability and quality of information, and their ability to make reasoned choices among competitor providers in the marketplace (Smith, 1993). An ethical obligation of marketing managers is to assess the degree of consumer sovereignty and redress any power imbalance that exists between company and consumer interests. This requires a marketing manager to (1) investigate and assess marketing programs and their effects, (2) legitimately research the marketplace, (3) face marketplace truths, and (4) effectively respond to significant threats caused by deficiencies in consumer sovereignty. Table 1 shows a general framework for assessing consumer sovereignty test developed by Smith (1993). A marketing manager would research the degree to which each consumer sovereignty dimension was present in a target market, use the associated criterion for establishing its adequacy, then interpret any imbalance among the dimensions.

Establishing the degree of consumer satisfaction is a requisite of competitive markets. Kotler's (1988) societal marketing concept centers on the directive that "the organization's task is to determine the needs, wants, and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors in a way that preserves or enhances the consumer's and society's well being" (p. 28). It is the ethical, moral, and strategic responsibility of credit card company marketing managers to assess the degree and quality of consumer sovereignty in the college student market.

MARKETING PROGRAM RISK ASSESSMENT TOOL

This section presents a marketing program risk assessment tool for use by marketing managers of credit card companies. It is a prescriptive framework for marketing managers to assess marketing program risk. Its purpose is to assist marketing managers in (1) profiling their current marketing programs to the students market, (2) establishing whether programs are deemed ethical as defined by meeting minimum legal standards, (3) assessing the nature and degree of consumer unrest and consumer sovereignty, (4) assessing whether risks posed by consumer unrest or lack of consumer sovereignty are effectively managed, and (5) determining whether current working philosophies and strategies (e.g., caveat emptor or caveat venditor) need to be refocused.

First, the marketing manager should begin by asking how well current marketing strategies meet legal standards. Strategies deficient in this area must be changed to comply with the law. On the other hand, when strategies meet or exceed legal standards (and there is no consumer unrest in the marketplace), the company should proceed with a caveat emptor philosophy but continue to monitor the marketplace for any signs of unrest that may be associated with consumer sovereignty.

The second question revolves around the degree of consumer unrest in the marketplace (even though the marketing strategies meet or may exceed legal standards). When there appears to be a degree of consumer unrest, appropriate market research should be conducted to determine its cause and likely effect. Specifically, investigations should be made into (1) the capability of the consumer target market and its degree of vulnerability, (2) the ability of consumers to assess the availability and quality of information, and (3) the ability of the consumer to make reasoned choices among marketplace alternatives.

If research shows that lack of consumer sovereignty in any area is causing a significant threat to the company and/or to the consumer, then the marketing manager must determine whether these risks are being managed effectively. If the company is not managing risks posed effectively, then a philosophical shift towards a caveat venditor position (where consumer interests are more prioritized) should occur. On the other hand, if under similar circumstances the risks are being managed effectively or there are no significant or impending risks, then the company should maintain a caveat emptor philosophy but continue to monitor all of the consumer sovereignty risk factors.

In the sections that follow, each aspect of the marketing program risk assessment tool is applied to credit card marketing programs geared to the college student market. The order of presentation follows the two primary risk assessment questions (see Figure 2), assessment results and their strategic implications.

[FIGURE 2 OMITTED]

HOW WELL DO CURRENT MARKETING STRATEGIES MEET LEGAL STANDARDS?

Marketing Strategies Poorly Meet Legal Standards

Competitiveness is not only present amongst credit card issuers in the industry, but is ever present in the industry's legal environment as well. All stakeholders--credit card issuers, college campuses, Congress, state legislatures, parents, and college students--have taken on active roles in trying to either protect or enhance the already existing lucrative credit card market, or to regulate marketing practices that have been deemed predatory and unethical. Some stakeholders are placed firmly on one side of the fence (e.g., parents), while others ride the fence well (e.g., college campuses).

Some of these positions have become battles in the courtroom (see Table 2) and have resulted in important victories for credit cardholders (Hinds, 2001). Cases of this nature do not create positive press for the credit card companies so this is countered with their credit education programs and huge monetary donations to political campaigns and higher education institutions.

It is apparent by many that marketing strategies fall short on providing due care to ensure that students' interests are not harmed by the credit cards offered them. The position of each stakeholder group is evident; and becomes a battle between fueling the caveat emptor marketing environment (e.g., let the buyer beware), establishing a consumer sovereignty position whereby a measure of responsibility is placed with the consumer, and creating a caveat venditor environment that protects the consumer (i.e., the unsophisticated college student consumer) while providing for that consumer's satisfaction.

The federal government's participation/role in investigating the marketing practices employed by credit card companies in targeting these young adults has been sporadic. The hearing on "Kiddie Credit Cards" before the Subcommittee on Consumer Credit and Insurance (1995) and the U.S. General Accounting Office Report to Congressional Requesters, "Consumer Finance: College Students and Credit Cards" (2001) have been notable exceptions. These investigations encompassed data and viewpoints from many perspectives--credit card issuers, college campuses, parents, and college students.

It is difficult to get an Administration and Congress, and college campuses, actively involved in credit card reform when the industry spends millions in support of politicians and the education system. According to the Federal Election Committee, in 2000, $9 million was given in campaign contributions (more than the contributions given by the tobacco industry and twice that of the gun-rights advocates). The largest contributor to President Bush's campaign was MBNA America Bank, one of the two largest distributors of credit cards on college campuses (Hoover, 2001). These dollars also flow to higher education institutions. For example, Penn State has been the beneficiary of millions, resulting in two buildings carrying the MBNA name; and the University of Delaware has the MBNA America Hall building and the MBNA Career Services Center (DiStefano, 2001). Dollars lead to intimidation and with the network of supporters across the country, any real public policy changes are often suppressed.

The recent agenda of the credit card industry, in order to support its profit maximization goal, has been to spend millions of dollars in an attempt to make it more difficult for consumers to declare personal bankruptcy. The Bankruptcy Reform Act that is before Congress would make it easier for credit card issuers to collect on debt (e.g., accounts receivable); debt that is often incurred through the use of high-interest credit cards that were issued to unqualified consumers who had already exceeded reasonable debt limits or high-risk individuals with no source of income. These credit cards are often obtained as a result of high-pressure marketing tactics (Consumer Federation of America, 2001). The proposed bill would support the profit motives of credit card issuers (caveat emptor) and would limit the information on the cost of carrying credit that is provided to consumers, not meeting the standards of consumer sovereignty.

Other recommendations that would protect consumers against unfair credit card practices run the spectrum from requiring on credit card bills a calculation indicating the duration of repayment (without any additional charges from use of the card) if minimum payment is made, elimination of the fee changed when consumers pay off their full balances on time, and prohibiting the mailing of unsolicited credit cards ("Recommendations for Colleges, Students, and Congress," 1998). All of these present strategies in the college credit card market underlie the caveat emptor position while encouraging the cardholder to carry the high-cost, credit card debt.

While major reform has not occurred in this industry, small inroads are being made. The Federal Reserve has made a response to the absence of consumer sovereignty, specifically the inability to assess/compare information due to unstandardized reporting procedures in the industry on critical comparative shopping criteria; with it new mandatory rules that took effect October 1, 2001. These include: (1) APR for purchases must be printed in 18 point font (historically, 12-point font or smaller has been used); (2) additional information to include not only the APR for purchases, but also the rates for cash advances and balance transfers (using a minimum 12-point font), must be included in the "Schumer box" (solicitations in the disclosure table format); (3) disclose penalty rates for late payments in a conspicuous place; and (4) Internet sites must show all rate information and an "accept" button relating to the terms must be clicked before the application is submitted (Sherry, 2001a).

To counter the lack of policy reform at the federal level, many states are proposing or enacting their own legislation in order to determine the effects of credit cards on college students, to educate young adults on personal financial management or to protect them against aggressive solicitation in an environment where they are a captive market. The leading impetus for this movement is pressures felt by legislators from the parents of college students, student groups, and negative media reports about aggressive credit card marketing practices on campus (U.S. General Accounting Office, 2001). The pressure has been broadly felt across the United States, for example, states that proposed or enacted legislation on credit card solicitation at institutions of higher education from 1999 to 2001 included Arkansas, California, Delaware, Hawaii, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Missouri, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia, Washington, and West Virginia (U.S. General Accounting Office, 2001).

In spite of an aggressive effort by the states, most proposals are vetoed by the governor, fail to pass the House, are withdrawn from further consideration, held in Joint Committee, or referred to another entity for review and consideration. Few get approved and thus raise the minimum bar for ethical standards in their respective states.

Marketing Strategies Meet Legal Standards

Has the credit card industry become sophisticated loan sharks by preying on the naivete of inexperienced college students? Manning, a noted researcher of the college student credit card industry, comments, "Students get their first card, and the offer says it's a 4.9 percent APR. Then they get their statement, and it's a 17.9 percent APR, and they see 4.9 percent was only for balance transfers" (Souccar, 1998). Caveat emptor, let the buyer beware, the interests of the credit card issuer (profit maximization) are paramount and override any serving of the customers' interests. The students want the money (students thinking of the cards as a source of income), the card issuers provide the money, and the students take on long-term indebtedness. Profit is maximized for the credit card issuers and students are overwhelmed by their early indebtedness.

The college student market offers great short-term and long-term profit potential. For the short-term, college students have a tendency to pay the minimum balance owed, which often amounts to just paying the interest that has accrued with minimal, if any, monies going to pay off the principal of the debt. Banks consider students their best customers because of that fact (Hoover, 2001). This amounts to a sizable profit as the U.S. Public Interest Research Group found almost 25.0 percent of college students paid their credit card bills late, or only paid the minimum amount due ("Update! Student Credit Card Debt", 1998). Long-term profit potential is also existent when it is realized that about 50.0 percent of college students (based on a MasterCard study) remain loyal to their first card after 15 years (Kessler, 1998), and on average, 12 to 15 years (Hultgren, 1998).

The drop in bad debts and personal bankruptcies has positively impacted the bottom line for credit card issuers. Profits were reported to be at their highest level in 2000 in relation to the last five years; with pre-tax return-on-assets (ROA) at 3.6 percent. This measure of profitability was a 16.0 percent increase over 1999 and 44.0 percent over 1998. Fee income generates a sizable portion of the profits, 28.0 percent in 2000, compared to 24.0 percent in 1999 (Consumer Federation of America, 2001).

Adjusting strategies for fee income, in order to fuel profits, appears to be commonplace in the industry. Prevalent strategies include: (1) increased use of penalty rates either for not adhering to the payment conditions (these can be as high as 25.0 percent) or by exceeding the credit limit (fees as high as $29); (2) increased late fees (66.0 percent increase from 1995 to 1998, averaging $21.82 but as high as $35; or use of a tiered penalty rate structure where the rate increase with each missed payment); (3) shortened grace periods (generally 20 to 25 days from the end of a billing cycle); (4) reduction in any leniency periods related to receiving payment at day/time of due date (tolerance has gone from 15 days to zero tolerance for some cards, resulting in immediate assessment of late fees); and (5) lowered minimum payments (down to 2.0 percent of the outstanding balance) (Consumer Federation of America, 1999; Sherry, 2001b).

Though credit card issuers may meet the legal standards in the industry, the marketing strategies that are employed often become questioned. The questioning is basically a result of different perspectives on how college students are viewed as a market. Credit card issuers want to treat college students as adults, yet they do not hold students to the same standards of meeting eligibility criteria for the acquiring of credit cards. If the college market were treated as part of the adult market, then they would be subject to the same screening and scoring mechanisms (i.e., employment and income) as other adults. From the students' perspective, they too want to be treated as adults but often feel that marketing strategies are aggressive and that they have been "baited" by the freebies that go along with the solicitations or the no-to-limited discussion of the credit card terms and usage.

Part of that baiting also comes through with the high affective appeals used in credit card advertising for this market. The strong emotional appeals to be independent from parents, purchase deserved rewards for oneself, be able to socialize with friends, have all the money one needs, and afford the spring break trip complemented by the introductory low interest rates and the frequent flyer miles, rebates, and cash advance checks, mask the responsible behavior that is necessary for the management of these cards.

The offering of rebates is among the strategies used in solicitations in order to garner that student as a credit cardholder. The promotion is set to provide a "... rebate during each billing cycle in which the total payment and credits to your account is less than the previous balance. Translation: To get any cash back, you must keep a balance and pay interest on the balance and on everything you charge next month" ("Just Who is Raking It In?" September 1998, p. 8). If the student reads the fine print, the bottom line would indicate that generally the rebate is nonexistent because high interest charges would most likely offset any rebate, and the rebate would be forfeited if any payments are late. Along with forfeiting the rebate, a $25 late fee is assessed and the interest rate is raised as a form of penalty ("Just Who is Raking It In?" September 1998). Though the information is provided, does the student have the financial understanding to interpret the information and make a responsible decision? Consumer sovereignty is in question.

Credit card issuers' business strategy for leveraging the opportunities presented to them by having this captive audience in optimum locations is to develop partnerships or alliances with the higher education institutions. This results in the caveat emptor philosophy being supported by many universities and the balancing act begins between looking out for their students while keeping both eyes on the bottom line.

Many universities not only permit aggressive credit card marketing on campus, but they also benefit financially from this marketing. Suddenly, it is in their interest for their students to be in debt. Credit card issuers pay institutions for sponsorship of school programs, for support of student activities, for rental of on-campus solicitation tables ($175 to $400 a day), and for exclusive marketing agreements such as college "affinity" credit cards. Approximately four out of every five colleges and universities permit some form of solicitation on campus (Berman, 1998; Souccar, 1998).

In 1999, 30.0 percent of the college students obtained credit cards through channels influenced or controlled by college campuses, compared with 34.0 percent receiving the offer through direct mail. Channels used and their resulting solicitation effect were: on-campus displays ("take one" applications on posters), 20.0 percent; card representatives on campus (through tabling, credit seminars, and special events), 6.0 percent; application included in bookstore purchase bag, 2.0 percent; and college publication advertisements ("Student Credit Cards," 2000).

Relationships between credit card issuers and universities are driven by the profit motive. These relationships thwart any state legislative initiatives to ban credit card solicitors from campuses because state universities and alumni groups like the lucrative agreements. Delaware-based MBNA Corp. is the industry leader in endorsement deals, having exclusive arrangements with over 600 U.S. universities and colleges (DiStefano, 2001).

While donations of up to $25 million for a building provide a major presence on campus, affinity programs provide the opportunity to reach students, as well as alumni of these institutions, and keep a consistent flow of dollars going into the coffers. With the MBNA/university credit card, millions again flow back to the universities. The rate can vary with each institutional agreement, but may typically range from 40 cents to $1 for every $100 charged, or 0.5 to 1.0 percent of the amount charged (DiStefano, 2001; Harris, 1996). The more the cards are used, the more dollars flow back to the respective universities.

Caveat emptor is present in the relationships that most credit card issuers have with universities and colleges. With this present, the basis for ethical conflict is apparent in attempting to balance the interests of credit card issuers and universities with the interest of these credit card customers, college students. Marketing managers need to continually assess for consumer unrest with an attempt to reach a level of consumer sovereignty, while continuing to meet the legal standards in pursuing the caveat emptor philosophy.

Marketing Strategies Exceed Legal Standards

Numerous credit card issuers, college campuses, and consumer advocate groups have made consumer credit education a high priority. Distribution of written materials, presentation of workshops on college campuses, development of advertising campaigns with the message of responsible use of credit cards, and the creation of Web sites for the purpose of educating on the wise use of credit have been some of the efforts made to increase the skill level of college students in order to make them more capable consumers in the choices and use of credit cards. With these endeavors, the parties involved (specifically, credit card issuers and college campuses) believe they are exceeding the legal standards and expectations of the market.

Research has also been conducted with the college market to better understand their attitudes, knowledge, and use of credit cards, and credit card development strategies for this market. College students' knowledge of and attitude towards credit cards (Warwick & Mansfield, 2000); differences in spending habits and credit use of college students (Hayhoe, Leach, Turner, Bruin, & Lawrence, 2000); number of credit cards held by college students based on credit and money attitudes (Hayhoe, Leach, & Turner, 1999); materialism and credit card use by college students (Pinto, Parente, & Palmer, 2000); the ethical implications of marketing credit cards to college students (Lucas, 2001); the relationship between credit card use and compulsive buying among college students, and the implications for consumer policy (Roberts, 1998); the role of parental involvement in the student acquisition of credit cards and the implications for public policy (Palmer, Pinto, & Parente, 2001); and factors important to college students in the selection of credit cards (Kara, Kaynak, & Kucukemiroglu, 1994) represent ongoing research in these areas. These studies have provided insight into determining the knowledge base of this market segment relating to credit cards, their uses and the respective attitudes toward usage, and the development of appropriate credit card marketing strategies based on the importance of factors in credit card selection (e.g., interest rate and type of payment).

Though credit card solicitation is prolific on most campuses across the country, it has been countered with strategies to temper the unrest college students and their parents might feel. A representative overview of these efforts include: American Express offering Optima student cardholders with a toll-free telephone number that provides credit and financial management information (Souccar, 1998); an industry-funded pilot program begun in 2000 on 15 campuses that employs students to educate their peers in money management ("Congratulations, Grads--You're Bankrupt," 2001); Citibank's "Ask Anita" service (an e-mail format) and the related comic strip being part of a comprehensive financial management education program focused on helping college students learn money management skills ("College Students: Boost Your Financial GPA and Take Charge of Your Credit Cards," 2001); Visa U.S.A. touring college campuses presenting information on money management in a game show format and providing budgeting and credit teaching material to universities and junior colleges (Souccar, 1998); and MasterCard International providing guidebooks to parents on teaching their children about credit and developing advertisements that illustrate the consequences of misusing credit (Souccar, 1998).

To further support their commitment to market responsibly to students on college campuses and to encourage the responsible use of credit, several card-issuing financial institutions (American Express, The Associates, Capital One, Citibank, Discover Financial Services, Household Credit Services, MasterCard International, MBNA America, and Visa U.S.A.) have established a "Code of Conduct" for on-campus solicitations. The Code establishes standards for tabling companies and their representatives, requiring signatures of both parties. With a copy kept on file, the credit card companies audit their practices and take appropriate action if the code is breached. The Code specifically states (U. S. General Accounting Office, 2001, p. 69):

* Tabling companies are responsible for ensuring that their representatives comply with these standards.

* Tabling companies will provide financial education materials supplied by the issuer to students who inquire about credit cards.

* Students will fill out their own applications; representatives of tabling companies will not tell a student what to put on the application, beyond giving general explanations.

* Representatives of tabling companies will be respectful of a student's wishes not to fill out an application if the student indicates that he or she is not interested in acquiring a credit card, or if the student walks away from the table. Representatives are strictly prohibited from following students away from the tabling area.

* Representatives of tabling companies will maintain a professional appearance and manner.

* Representatives of tabling companies will carry identification and a letter of authorization from the tabling company and/or the credit card company. The letter of authorization should be valid for a specified period of time and should include contact information for the tabling company and the credit card company that the individual is representing.

All students using credit cards do not end up in positions of indebtedness where the options are seen as long-term payment of the debt, parents stepping in to pay off the bills, securing other consumer loans for payment, filing personal bankruptcy, or for some, suicide. The overwhelming majority of college students use their credit cards responsibly with the help of numerous resources provided by such entities as credit card issuers, college campuses, and consumer advocate groups. With making quality credit information available to the college student market, their capabilities to make responsible financial choices and financial management decisions are enhanced. Consumer unrest is not present in the marketplace (and less likely to occur in the future); marketing managers should continue to pursue the caveat emptor philosophy, with the continual monitoring of the college market response to the marketing strategies practiced.

TO WHAT DEGREE HAS THERE BEEN CONSUMER UNREST, CONSUMER SOVEREIGNTY, AND RISK MANAGEMENT?

Consumer Unrest, Lack of Consumer Sovereignty, Risks Not Effectively Managed

While the marketing strategies of credit card issuers may meet legal standards, their implementation is having devastating effects to the financial and psychological futures of a noticeable portion of the students market. The caveat emptor mentality has given birth to signs of consumer unrest among students, parents, attorneys, universities, issuers, and industry consultants. The signs of unrest are prevalent.

The fastest growing group of bankruptcy filers is under 25 years old. Filings by this group increased 51.0 percent between 1991 and 1999, with a total of 120,000 filings (6.90 percent of all filings) in 2000 ("Credit-Card Debt Pushing Youth into Bankruptcy," 2001; Berman, 1998; Hoover, 2001; U.S. General Accounting Office, 2001). Legal firms such as Prescott and Pearson, a firm handling near 20.0 percent of all Minnesota bankruptcy cases, report that about 1/5 of their clients are in their 20s ("Credit-Card Debt Pushing Youth into Bankruptcy," 2001). Specific investigations into the personal bankruptcies of college students reveal histories of excessive credit card purchases (Souccar, 1998). The majority of young adults who file bankruptcy (70.0 percent) opt for Chapter 7 whenever possible, and attempt to absolve themselves of the debt with minimal penalty ("Credit-Card Debt Pushing Youth into Bankruptcy", 2001). According to Hoover (2001), the first adult act for thousands of young adults may be to declare themselves financial failures. For the majority of college students who are fortunate enough to avoid the imposing threats of bankruptcy, the future may be tenuous at best. Once they enter the job interview phase of their career track, many students with high credit card debts are having trouble getting good jobs because employers are viewing a student's personal credit reports as an indicator of financial astuteness. One interviewee was asked by a major Wall Street Banking firm, "How can we feel comfortable about you managing large sums of our money when you have had such difficulty handling your own credit card debts?" (Manning, 1999). The psychological problems resulting from unsustainable debts can be more severe than the strains posted by financial pressures or threats to future employment. These problems manifest themselves in generalized anxiety, dysfunctional escapist strategies, and suicidal attempts (Consumer Federation of America, 1999).

The Consumer Federation of America (1999) has found that typically students progressively slide into debt as unsecured credit lines are routinely extended and minimum monthly payments are lowered. Frequent flyer miles, rebates, and cash advance checks may encourage the high-affective (and often low-income) college student to expand credit use into daily financial transactions, such as entertainment, gasoline purchases, and food away from home (Hayhoe, Leach, Turner, Bruin, & Lawrence, 2000). On target credit card campaigns positioned to the student market revolve around appeals to emotional desires (the desire to pamper oneself, acquire a desired standard of living, travel to foreign countries, and entertain). Joined with the ease of unsecured credit access, this is really staggering, when you consider most college students have just a part-time job (Berman, 1998).

Fueled by the emotional engine, students have brought their financial naivete into a sophisticated financial arena where prowess pays. Debt counselors observe a similarity between marketing credit cards to students and "hawking cigarettes to minors", saying the similarities are uncanny and protectionist strategies should be implemented (Souccar, 1998). Critics charge that card companies are offering millions of dollars in credit without showing students how to use it responsibly, causing consumer unrest.

The degree to which consumer sovereignty exists in the students market has come under scrutiny by parents. One parent highlights the vulnerability of college students and their inability to comprehend the scope and risk of their own behaviors; "I believe in the right of business to make a profit, but it appears that the credit card industry that I have come in contact with has become the sophisticated loan sharks for the middle class by preying on the naivete of inexperienced college students, they are taking advantage of the trust their professionalism has given them. We do not hand out driver's licenses and then hope some day that a student will learn to drive, why dish out unsecured credit, and then hope students can handle it?" (Committee on Banking, Finance, and Urban Affairs, 1995).

To allow students access to unsecured credit cards before screening them and addressing threats posed by lack of consumer sovereignty is financial homicide; issuers who do not establish for adequate controls in the marketplace are being brought to justice through legal recourse (see Table 2) and student bankruptcy rates are increasing.

Some university officials have recognized that mounting credit card debt is taking its toll, as students with unsustainable debt loads are forced to cut course loads or drop out of school to increase work hours and pay off debt. Students themselves have blamed card debts for their defaults on tuition payments (Souccar, 1998). Students see themselves as victims. In fact, in 1998 the University of Indiana reported that it lost more students to credit card debt than to academic failure (Credit Union National Association Inc, 1999). Responses from universities range from establishing limited policies to guide credit card soliciting on campus to banning solicitation from campus entirely. A number of colleges (e.g., John Jay College of Criminal Justice in New York, Widener Universities' Chester, PA campus, Boston college, and Northeastern University) banned card solicitors, saying indebtedness was causing students to drop out (Schembari, 2000; Souccar, 1998). University bookstores have also agreed to stop putting card advertisements in checkout bags or have only allowed card stuffers from companies like American Express which do not allow students to carry revolving balances (Souccar, 1998). Responses such as these have compelled some state legislators to introduce bills that curb on-campus soliciting (Berman, 1998). Unfortunately, most university administrators and credit card promoters refuse or are not empowered to acknowledge their roles in these outcomes. Instead, the corporate mantra of individual responsibility and caveat emptor is invoked (Manning, 1999)

There is admission within the industry itself that consumer sovereignty risks are not being managed effectively. Some marketing managers have questioned whether they should be profiting from the potential lack of consumer sovereignty in the students market; and responded by proactively monitoring student accounts for unusual patterns of activity and encouraging faster payoff and less interest accrual by raising minimum monthly payments. AT&T, for instance, has begun to monitor student accounts for unusual patterns of purchase or payment activity, and raised their minimum monthly payment from 2.2 percent to 2.5 percent (Committee on Banking, Finance, and Urban Affairs, 1995).

Robert Bugai, a campus marketing program consultant and President of College Marketing Intelligence of North Arlington, N.J., is critical of credit card marketing programs because the barriers to entry for becoming a student credit card holder are almost entirely removed to the point that a student can sign up for a card with no prescreening or pre-approval process; no knowledge of annual percentage rates, minimum payments, and other concepts. The working assumption behind most college marketing program initiatives is that college students for the most part are financially illiterate (Souccar, 1998).

Evidence and suspicions abound against the credit card industry and its marketing practices to the students market. It is clear that unrest is ever present among students and stakeholders. When consumer unrest has been identified as a significant force in the marketplace and consumer sovereignty dimensions are deficient, then marketing managers must make a philosophical shift towards a more ethical caveat venditor philosophy wherein consumer interests and sovereignty are prioritized to a greater degree so the power balance between producer and consumer interests is less suspect, even at the expense of profit maximization.

Consumer Unrest, Lack of Consumer Sovereignty, Risks Effectively Managed

To help stave off criticism and negative press about marketing to the students market, a number of leading issuers feel they are managing risk effectively by having turned to aggressive educational training support programs and key strategic alliances.

MasterCard International has spent an undisclosed amount on a campaign featuring credit-education ads (which discuss the pitfalls of misusing credit) on MTV and in popular youth magazines such as Rolling Stone, Spin, Wired, and an interactive Web site (www.Creditalk.com), allowing students to manipulate financial charts and budget expenses (Berman, 1998; "Doing Something about the Problem", 1997). MasterCard's Consumer Education Program partners with national college student leaders to offer an educational (not sales-oriented) "Are You Credit Wise" campus-wide program, which provides money management information to college freshmen; including budgeting, bill payment, responsible use of payment cards and the importance of building a credit history. MasterCard also allied with College Parents of America (CPA), the leading advocacy organization for parents and college students, to offer an educational program called 'Money Talks'. Brochures provide advice to parents on how to talk to their college-aged students about personal finances. MasterCard Consumer Education Programs also include: (1) "Be E-Wise", an educational brochure developed with the National Consumers League (NCL) on how to conduct online transactions safely, (2) "Kids, Cash, Plastic and You", a consumer education magazine developed with the U.S. Office of Consumer Affairs to help parents teach children about money management, (3) League of United Latin American Citizens (LULAC), a Latino consumer education program on money management, (4) "MasterCard University" where online consumers get basic financial information and budgeting help, and (5) "Master Your Future" video and curriculum guide for high school teachers to integrate into their lesson plans (MasterCard International Press Office, 2002).

Visa also has a media campaign aimed at teaching college students how to use credit wisely. Visa sends out educational kits to freshman orientation leaders at over 4,000 colleges, along with advice on how students should select credit lines. Visa has toured over 30 campuses in the U.S. with a glitzy game show designed to teach students how to manage money in a fun atmosphere. Finally, they sent out teaching materials on budgeting and credit to over 4000 universities and junior colleges with the intent of supporting an educational program to be taught during freshman orientation, resulting in over 70.0 percent participation rate (Souccar, 1998). American Express also has an interactive Web site for students and hands out educational materials with applications, and students must sign special "clear language" statements saying they understand the terms ("Doing Something about the Problem", 1997; Souccar, 1998). Citibank and First USA tie some of their product pitches to informal credit-education seminars typically held in dorms and fraternity houses (Berman, 1998). Private companies are also on the scene. Philadelphia-based Campus Dimensions annually blankets over 1,000 schools nationwide using up to 20,000 exhibits to feature information for clients such as AT&T Universal Card, MasterCard, Sunoco, and Unocal (Berman, 1998).

Bank card associations are also pouring money into promotions, brochures, and even entertainment events to encourage smart use of credit among the students market (Souccar, 1998). Launched in early 1998, www.studentcreditcard.com offers ongoing finance and credit education by offering practical advice on maintaining a good credit record, managing money responsibly and creating a personal budget. The site also builds loyalty and retention by giving college students special values while enabling electronic processing of credit card applications ("Student Credit Card Web Site Recognized with Four Awards", 1999). Non profit organizations such as the Consumer Credit Counseling Service of Southern New England, conduct freshmen budgeting information sessions each summer; offer 40 different programs for students throughout the state each year (Healy, 2001).

Lenders claim that programs and initiatives such as these, geared to the college market promote financial responsibility among students and should be supported by university officials. The industry gives public assurance that they themselves are responsible. "We review all applicants carefully, and make great effort to help college students use their credit wisely," said Darrell Colemen, marketing manager for Wells Fargo Card Services, "We want to build long-term relationships with new customers" (Berman, 1998). Long-term relationships are also being sought with colleges and universities, some of which are beginning to view this issue as a component of higher education.

In spite of these initiatives, true success seems to be still out of reach. Survey results of 1260 undergraduate students across 15 campuses show that only 59.0 percent of all students found credit card education materials "not helpful"; over 26.0 percent found introductory "teaser rates" misleading; and when asked how long it would take to pay off a $1,000 credit card debt at an 18.0 percent APR and making only minimum payments, 80.0 percent of students didn't know ("Survey Finds Credit Card Industry Targets Students", 1998). Schnurman (1999) states that student consumers are less knowledgeable about personal finance and more impulsive in their spending than traditional adult markets. Furthermore, consumer credit counselors report a 10.0 percent increase in walk-ins from college students looking for help to manage their way out of a financially threatening situation (Committee on Banking, Finance and Urban Affairs, 1995).

The presence of student credit counseling services and stop-gap aid from parents have buffered the effects of the debt squeeze on the student market and possibly clouded its accurate assessment by marketing managers, an example of a problem situation that has been buffered would be the relatively lower default rates for students as opposed to other demographic segments (Weinstein, 1998). Lenders may be choosing to see the proverbial glass half full of responsible and paying customers who access and empower themselves with the educational opportunities provided. This may lead to an overgeneralization and invalid conclusion that the majority of student credit card holders are responsible citizens. An understandable mistake because "If you're going to be at a credit seminar, you're going to be more responsible in the first place," says Larry Chiang, founder of $11 million United College Marketing Services, which collects up to $25 for every application its seminars bring in for a sponsoring bank (Berman, 1998).

Although leaders in the industry have identified consumer unrest, some marketing managers believe that consumer sovereignty issues have been adequately addressed by current marketing strategies and that any significant risks posed by lack of consumer sovereignty are being effectively managed. These companies will continue with a caveat emptor mindset but should continue to monitor the degree of consumer unrest, threats from lack of consumer sovereignty, and the effectiveness by which risks are being managed. Their marketing efforts will likely remain aggressive on and off college campuses, whether support from university officials exists or not. After being expelled from a New York University school building, one issuer was still so adamant that consumer sovereignty existed in the college market (and any ethical dilemmas mentioned by the university officials were fictions of their imagination), that it simply set up tables on nearby public sidewalks.

Consumer Unrest, Consumer Sovereignty is Present

Once consumer unrest and consumer sovereignty have been legitimately researched, a company may find that its targeted market possesses adequate sovereignty, is not vulnerable and can effectively assess availability and quality of information when making choices in the marketplace. Proponents in the credit card industry have argued that college students fall into this category, do have a clear sense of financial responsibility, are cautious in using credit cards, and are merely a participant in a society that has embraced a culture of debt (Hoover, 2001; Newton, 1998). The U.S. Government released a GAO Report (July 17, 2001) that provided ample evidence that the marketing, underwriting and servicing of credit cards to college students is being conducted in a responsible manner by credit card issuers. It shows that card issuers, students, college administrators and college alumni are all involved in the process of marketing credit cards to college students, and are supporting educational initiatives as well.

If consumer sovereignty is indeed adequately present in the consumer's market then strict arbitration clauses that hinder a student's right to sue their credit card company and federal government mandates that student loans cannot be discharged in a bankruptcy action (Blair, 1997), should not cause concern. For if the student consumers are sovereign, then as they express their freedoms in the financial community to use their credit cards, they should be held to the same accountability as any other adult consumer. Marketing managers who know that there is some unrest in the student markets but have convincing evidence that consumer sovereignty is present should continue with caveat emptor strategies while continually monitoring consumer unrest, potential risk posed by consumer sovereignty factors, and manage the existing unrest as effectively as possible. Keeping in mind that there are inherent powers held by credit card companies and leveraged against student consumers; and that the exercise of these powers are used within the social conditioning of a credit-laden and debt-accepting culture (Galbraith, 1984). In other words, unethical practices may go unnoticed because even if they are causing financial hardships on students, our cultural tolerance for financial hardships has increased along with our debt loads.

FUTURE TRENDS

Colleges and lenders are increasingly working together to provide financial management education via curriculum enhancements throughout the student's college career (Healy, 2001). Ending credit card solicitation by issuing banks on campus does not appear to be a solution that will develop consumer sovereignty since there are multiple sources where students may acquire credit card applications, as well as it does nothing to educate further the student on the basic principles of using credit (Warwick & Mansfield, 2000). Consolidated Credit Counseling Services, Inc. (CCCS), points out that 80.0 percent of colleges and universities permit some form of on campus credit card solicitation, and nearly 80.0 percent of full-time undergraduates have credit cards (Consumer Federation of America, 1999).

Some issuers are agreeing to take a more conservative lending approach to students; putting lower borrowing caps on accounts, instituting stricter re-issue rules, and limiting the number of credit cards issued to students. In practice, credit limits must be based on the applicant's present income, not on their potential to earn (Consumer Federation of America, 1999). Limits could be set on the total revolving credit extended to individual students (certainly to no more than 20.0 percent of their incomes unless parents co-sign for the debt). College ethics codes should prohibit administrators from accepting subsidies from issuers, should severely restrict credit card marketing on campus, and insist that the quid pro quo for marketing is effective financial education for cardholders, especially during freshman orientation (Consumer Federation of America, 1999).

Congress and issuers could form an alliance and phase in an increase in the minimum payment allowed from 2.0-3.0 percent to 4.0 percent. Historically, the decline in the typical minimum payment to 2.0-3.0 percent (resulting in more revolving credit and higher interest payments) has been responsible for much of the rise in consumer bankruptcies through the past decade. The low minimum payment barely covers interest obligations, convinces many borrowers that they are okay as long as they can meet all their minimum payment obligations. But those that cannot afford to make these payments carry so much debt that bankruptcy is usually the only viable option (Consumer Federation of America, 2001). Government could consider regulating the issuance of cards to children under the age of 21 (Consumer Federation of America, 1999). Congress could pass legislation permitting only those minors with parental approval or sufficient income to obtain credit cards. In a national opinion survey conducted by Opinion Research Corporation International in April, 79.0 percent of those between the ages of 18 and 24 supported such a restriction (Consumer Federation of America, 1999).

Recommendations for parents of college students include (1) Educating students about credit cards. According to CCCS, 44.0 percent of students understand the word "budget", 34.0 percent comprehend the concept of buying on credit, and a mere 8.0 percent have a knowledge of compound interest. They don't grasp the often-expensive issues of grace periods, late payments, finance charges, and minimum payments. Students also need to learn about the importance of building and keeping a good credit history since it affects their chances of getting future loans and even their ability to find a job. (2) Teach students to keep just one card. Even if the credit limit for a newly issued card is $500, a student with a handful of cards can run up a lot of debt in a hurry. Credit limits tend to climb depending on age and credit history, so the student might be smart to ask for a low credit limit initially and keep it there. (3) Teach students to watch out for teaser rates. Select a card based on its full rate, not a teaser one. Some cards for college students offer rates around 8.0 percent, but jump to 16.0-17.0 percent within a few months. Also look for cards with low or no annual fees as well as reasonable late-payment, grace period, and billing policies. (4) Help students practice, start students out with a debit card. (5) Don't co-sign their card, parents will be legally responsible for paying the debt, late fees, and could hurt their own credit (O'Connell, 1994). (6) Encourage students to keep it paid off or pay more than the minimums and to request a lower interest rate after establishing a good payment history. Be sure they understand the high cost of making only the minimum payment, which will run up the interest charges over time. ("Are College Students Ready for Credit Cards?" 2000).

Students need to limit their spending; they need to think about the long-term consequences of how they use credit; they need to realize the value of delayed gratification (Consumer Federation of America, 1999).

CONCLUSION

Marketing managers of credit card companies face what seem to be almost insurmountable realities and risk factors when marketing to college students. Most of the large research studies that comprise this field of study use generally sound methodologies but have some generalization limitations. For example, the TERI/IHEP and Student Monitor studies relied on self-reporting and were subject to non-response from sampled students, and the Nellie Mae study covered only a small pool of students who were trying to get a particular type of loan. But in spite of these limitations, their results are fairly consistent. Not only are signs of consumer unrest noticeably present, but there is significant unrest among other stakeholders such as parents, educational institutions, state legislators, and consumer activist groups. There is no way for a marketing manager to turn a blind eye to these dynamics. Sentiment is strong and accusations that consumer sovereignty does not exist to the degree it should are resounding loudly.

 It is unconscionable for marketing programs of credit card issuers
 to take advantage of a college student's youth and inexperience.
 They are ignoring their own sound banking practices by changing the
 rules just to benefit themselves. Banks cannot state in their
 contract that falsely representing one's credit worthiness is a
 crime and them turn around and give credit to one who is not
 creditworthy when it suits their own financial benefit. As
 professionals with the public trust, they have the responsibility
 not to ignore their own rules (Committee on Banking, Finance and
 Urban Affairs, 1995).

In a highly competitive arena where the strongest form of advertising is well accepted to be 'word of mouth', these voices are risks that must be effectively managed through ethical marketing strategies that balance well the power and interests of producer and consumer.

REFERENCES

Are college students ready for credit cards? (2000, August). USA Today (Magazine), 129(2663), 9.

Berkowitz, E.N., Kerin, R. A., Hartley, S. W. & Rudelius, W. (2000). Marketing (6th ed.). Boston, MA: Irwin/McGraw-Hill.

Berman, D. (1998, January 12). A campus revolt-against credit-card companies. Business Week Online. Retrieved October 30, 2001, from http://www.businessweek.com/bwdaily/dnflash/jan1998/nf80112a.htm

Blair, A. D. (1997). A high wire act: Balancing student loan and credit card debt. Credit World, 86(2), 15-18.

Chonko, L. B. & Hunt, S. D. (1985). Ethics and marketing management: An empirical examination. Journal of Business Research, 13, 339-359.

College students: Boost your financial GPA and take charge of your credit cards. (2001, April 2). PR Newswire.

Committee on Banking, Finance and Urban Affairs, House of Representatives, 103rd Congress, Subcommittee on Consumer Credit and Insurance. (1995). Kiddie credit cards (Serial No. 103-124). Washington, DC: U.S. Government Printing Office.

Congratulations, grads-you're bankrupt. (2001, May 21). Business Week, (3733), 48.

Consumer Federation of America. (1999, June 8). Credit card debt imposes huge costs on many college students. Retrieved October 10, 2001, from http://www.consumerfed.org/ccstudent.pdf

Consumer Federation of America. (2001, February 27). Credit card issuers aggressively expand marketing and lines of credit on eve of new bankruptcy restrictions. Retrieved January 30, 2002, from http://www.consumerfed.org/travpr.pdf

Credit-card debt pushing youth into bankruptcy. (2001, June 4). Grand Forks Herald, 7A. Associated Press, Minneapolis.

Credit Union National Association Inc. (1999). Student credit card debt looms large. Retrieved October 30, 2001, from http://www.secu.slb.com/hffo/0799_f.htm

DiStefano, J. N. (2001, April 20). Students pay when campuses benefit from credit-card solicitations. Knight-Ridder/Tribune News Service, K4425.

Doing something about the problem. (1997). Commercial Law Bulletin, 12(6), 8-9.

Galbraith, J. K. (1984). The Anatomy of Power. London: Hamish Hamilton.

Harris, M. (1996). How to teach your kids the right way to use credit. Money, 25(11), 45-46.

Hayhoe, C. R. Leach, L. & Turner, P. R. (1999). Discriminating the number of credit cards held by college students using credit and money attitudes. Journal of Economic Psychology, 20, 643-656.

Hayhoe, C. R., Leach, L. J., Turner, P. R., Bruin, M. J. & Lawrence, F. C. (2000). Differences in spending habits and credit card use of college students. Journal of Consumer Affairs, 34(1), 113-133.

Healy, P. (2001). Credit cards a growth business with college students. Providence Business News, 16(14), 11.

Hinds, S. (2001). Cardholder actions bring relief from unfair practices. Consumer Action News Survey 2000-2001. Retrieved 1/30/02 from www.consumer-action.org/Library/English/Newsletter/ NL-I-19_EN/NL-I-19_EN.html

Hoover, E. (2001, June 15). The lure of easy credit leaves more students struggling with debt. The Chronicle of Higher Education. Retrieved October 7, 2001, from http://chronicle.com/weekly/v47/i40/40a03501.htm

Hultgren, A. (1998). Help students handle cards. Credit Union Magazine, 64(8), 10. Just who is raking it in? (1998, September). Consumer Reports, 63(9), 8.

Kara, A., Kaynak, E. & Kucukemiroglu, O. (1994). Credit card development strategies for the youth market: The use of conjoint analysis. International Journal of Bank Marketing, 12(6), 30-36.

Kessler, A. (1998). College students: A market worth pursuing. Bank Marketing, 30(7), 14-16.

Kotler, P. (1988). Marketing management: Analysis, planning, implementation, and control. Englewood Cliffs, NJ: Prentice Hall.

Lucas, L. A. (2001). Integrative social contracts theory: Ethical implications of marketing credit cards to U.S. college students. American Business Law Journal, 35(2) 413-440.

Manning, R. (1999, June 8). Credit cards on campus: Costs and consequences of student debt. The social consequences of student credit dependency. Consumer Federation of America, National Press Club, Washington DC.

MasterCard International Press Office, MasterCard International. Consumer education programs. Retrieved January 30, 2002 from http://www.mastercardintl.com/about/press/consumereducation.html

Newton, C. (1998). Today's college students: Responsible, self-reliant, realistic. Credit World, 86(4), 16-17.

O'Connell, V. (1994). A new campus stalker: Credit-card companies. Money, 23(9), 40.

Palmer, T. S., Pinto, M. B. & Parente, D. H. (2001). College students' credit card debt and the role of parental involvement: Implications for public policy. Journal of Public Policy and Marketing, 20(1), 105-113.

Pinto, M. B., Parente, D. H. & Palmer, T. S. (2000). Materialism and credit card use by college students. Psychological Reports, 86, 643-652].

Recommendations for colleges, students, and Congress. (1998). The Campus Credit Card Trap. Retrieved February 22, 2002 from http://www.pirg.org/student/consumer/credit98/page4.htm

Ring, T. (1997). Issuers face a visit to the dean's office. Credit Card Management, 10(7), 34-39.

Roberts, J. A. (1998). Compulsive buying among college students: An investigation of its antecedents, consequences, and implications for public policy. The Journal of Consumer Affairs, 32(2), 295-319.

Schembari, J. (2000, February 27). New college sticker shock: Junior's credit card bill. New York Times, Late Edition (East Coast).

Schnurman, M. (1999, February 23). Credit card companies increasingly target students. Erie Times Daily, 7D.

Sherry, L. (2001a). Feds target credit card offers. Consumer Action News Annual Credit Card Survey 2000-2001. Retrieved 1/30/02 from www.consumer-action.org/Library/English/Newsletter/ NL-I-19_EN/NL-I-19_EN.html

Sherry, L. (2001b). Pay on time or pay the price. Consumer Action News Annual Credit Card Survey 2000-2001. Retrieved 1/30/02 from www.consumer-action.org/Library/English/Newsletter/ NL-I-19_EN/NL-I-19_EN.html

Smith, N. C. (1993). The role of ethics in marketing management. In N. C. Smith, & J. A. Quelch (Eds.), Ethics in Marketing (pp.3-9). Boston, MA: Irwin.

Souccar, M. K. (1998, September 9). The new 3 r's on college campuses: Reading, 'riting, and revolving debt. American Banker, 163(179), 1.

Student credit cards. (2000, July 31). Card Marketing, 4(7), 12. Student credit card web site recognized with four awards. (1999, Sept. 7). PR Newswire, 2479.

Survey finds credit card industry targets students. (1998, September 17). The Campus Credit Card Trap. Retrieved October 26, 2001, from http://www.pirg.org/student/consumer/credit98/page2.htm

Update! Student credit card debt. (1998). Commercial Law Bulletin, 13(6), 7.

U.S. Department of Education, National Center for Education Statistics. Projections of education statistics to 2011. Retrieved February 11, 2002, from http://nces.ed.gov/pubs2001/proj01/tables/table10.asp

U.S. General Accounting Office (GAO). (2001, June). Consumer finance: College students and credit cards. (Report to Congressional Requesters, GAO-01-773). U.S. General Accounting Office.

Warwick, J. & Mansfield, P. (2000). Credit card consumers: College students' knowledge and attitude. Journal of Consumer Marketing, 17(7), 617-626.

Weinstein, B. (1998, September 6). Campus card games: Survey challenges common belief that college students abuse credit. The Boston Globe, N5.

Mary K. Askim, University of North Dakota

Connie R. Bateman, University of North Dakota

TABLE 1

Marketing Ethics Framework: Consumer Sovereignty Test

Dimension Establishing Adequacy

Capability of the consumer. Vulnerability factors (age,
 education, income, etc.).
Ability to assess the availability Sufficient to judge whether
& quality of information available expectations of purchase will be
 fulfilled.
Ability to make choices among Level of competition and
provider options. switching costs.

Source. Smith, N. C. (1993). The role of ethics in marketing
management. In N. C. Smith, & J. A. Quelch (Eds.), Ethics in Marketing
(pp. 3-9). Boston, MA: Irwin.

TABLE 2

Class Action Cases Setting Legal Precedent

 Specific
Company General Claims Charges Pay Out

Providian Deceptive Sales of $105 million
 marketing and optional
 sales products
 procedures (coupons,
 Targeted credit
 credit-impaired protection)
 people marketed
 deceptively or
 added to
 accounts
 without
 permission

First USA Unfair late 3rd party $39 million
 fees processor $45 million
 delays in total
 payment (including
 postings caused administration
 accounts to be of the
 wrongly charged settlement)

Fleet Bank False Increased fixed Pending
 advertising & APR after one
 deceptive month
 practices

Capital One Illegal fees & Illegal late $45 million
 failure to fees, over the
 disclose limit fees,
 policies failure to
 disclose
 policies

Chase Manhattan Unfair Early a.m. $22.2 million &
 deadlines deadline noon deadline
 posting (with 1 day
 transactions leniency)
 received on due
 date

MBNA America Deceptive Balance $6.4 million
 offers transfer offers
 were deceptive

Source. Hinds, S. (2001). Cardholder actions bring relief from unfair
practices. Consumer Action News Annual Credit Card Survey 2000-2001.
Retrieved January 30, 2002 from
http://www.consumer-action.org/Library/English/Newsletter/
NL-I-19_EN/NL-I-19_EN.html