by Joseph Kenny | 06/11/09

One of the most important results of the new credit card legislation that President Obama signed in to law on May 22, is that there will be new restrictions on credit card issuers to maintain fair practices, avoid interest rate increases without notification, increasing fees, or penalizing customers who pay their balances on time.

The law, called the Credit CARD Act of 2009, has another provision that has many finance experts split. This provision focuses on credit card use for young people that would not allow anyone under 21 to apply for a credit card unless another party, such as a parent, guardian, or spouse will agree to cosign. The only exception is if the under-aged person has sufficient income to make payments.

The focus of this provision of the credit card bill is meant to prevent card companies from targeting college-age students in their marketing schemes.

Lender Sallie Mae conducted a study that highlighted the credit card practices of this demographic. According to figures released, 76% of undergrads had at least one credit card in 2004. This number was now 84%. Cards are routinely being used to pay various educational expenses. Additionally, 82% of undergraduate students with credit cards reported that they did not payoff the full balance each month.

Different aspects of the provision are being debated to determine if they really assist younger Americans with proper credit card use.

The top issue is the role of the cosigner. Supporters say that having one can help younger users make better financial decisions. Cards will not be available only to cosigners that have decent credit histories so bad credit card habits will be less likely to be perpetuated.

Others cite the wait. No one really wants to wait until to have a credit card, especially not college students. In fact, there can be some drawbacks to waiting that long to be eligible for credit cards. At the top of the list is credit history. No matter you age, credit history matters when gauging a score. Lack of sufficient history can hinder you when trying to get leasing on a vehicle or renting an apartment without assistance.

There is also the question of whether the credit will be available for young people when they reach 21. The new legislation, by design, reduces the opportunities for card issuers to cover their costs on the higher-risk consumers. This includes first-time borrowers. Lenders, obviously, will not be as ready to approve these people under current legal restraints.

These factors and more are providing a healthy dose of debate among finance experts and legislators alike. The question remains what the effects will be for the younger consumer.