It wasn’t supposed to be this way. The CARD Act was going to remove temptation from college kids by sweeping banks’ promotions from campuses, banning freebies, and preventing those younger than 21 years old from making credit card applications without an adult co-signer unless they had their own income.

Credit card companies go back to school

Those should have been valuable protections, but, as The Wall Street Journal revealed May 7, they’re not. While abiding by the strict letter of the law, credit card companies are successfully circumventing all three regulations. As law Professor Jim Hawkins of the University of Houston told The Journal, “a ton of loopholes” allow issuers to undermine the spirit of the act.

Yes, card issuers no longer have stalls on campus, tempting students to sign credit card applications with free slices of pizza or T-shirts or Frisbees. The stalls have moved, sometimes just yards off-campus, to paths that students use heavily. Or they remain on campus but market only checking accounts. Then, anyone who signs up for one of those check accounts is likely to start receiving credit card offers from their new bank through the mail. Or they have moved online, using email and social networking sites to reach kids.

And what of those pizza slices and Frisbees? They have been replaced with vouchers and statement credits, neither of which counts as a “tangible item as a gift” within the meaning of the Credit CARD Act.

Credit card applications that don’t need co-signers

None of this would matter too much if every application had to be co-signed by a responsible adult. But that’s not the case either. To begin with, any adult will do, so a fellow student who’s over 21 can sign.

However, it’s unlikely that many bother to find a senior to provide a John Hancock. Why would they? The law says that those under 21 can sign on their own providing they have an independent income, a provision intended to allow youngsters with jobs or trust funds from being disadvantaged. But, as this credit card news blog observed last August (Student credit cards-still hard lessons to be learned), banks seem willing to treat pretty much anything, including allowances from parents and student loans, as independent income.

Yes, that’s right. Kids can count the money they’re borrowing in student loans to borrow more money on credit cards. In fact, when Professor Hawkins polled 300 students last year, 29 percent of respondents said they’d used student loan debt as “income” on their credit card applications.

They needn’t have gone to the trouble because card issuers don’t routinely check income claims on applications. So some student credit cards may be the equivalent of so-called “liar loans”, which caused so much damage to the mortgage market back before the credit crunch.

Student credit cards can be good

So what’s a parent to do? For those with financially responsible offspring, the best plan may be to find good student credit cards before their kids head off to college, and to warn them off taking on any new ones. That could be good training in taking responsibility.

Published 05/17/11 (Modified 03/25/13)