Congress is poised to strictly limit a form of debt that is aggressively marketed to college students, often with the assistance of institutions they attend, and that contains confusing terms and conditions and dangerously high interest rates.

This debt doesn't come with a promissory note, it's plastic.

At the end of April, the U.S. House of Representatives easily passed a bill known as the Credit Cardholders' Bill of Rights. If enacted, that measure would limit some of the most egregious credit card company practices, including marketing their products to underage students. The Senate is considering its own version of the legislation this week, and in many ways it is harder on the credit card companies than the House bill.

While we applaud these measures, we would like to see Congress go further and provide more sunshine on the lucrative arrangements some colleges and universities have forged with credit card companies that have enabled them to profit off of their students' indebtedness.

The House and Senate bills primarily focus on restricting some of the most notorious credit card billing practices, such as double billing, a way of calculating finance charges that hurts borrowers with fluctuating balances. Both bills would also take noteworthy steps to tackle the growing credit card debt burden being taken on by students.

Just how bad a problem is it? A report recently released by Sallie Mae found that 84 percent of students sampled had at least one credit card and that their average balance was $3,173. Sallie Mae's numbers are slightly higher than, but consistent with, figures published in a study last year by the U.S. Public Interest Research Group Education Fund, which found that 64 percent of its students surveyed had at least one credit card, with average balances ranging from $1,301 for freshmen to $2,623 for seniors.[1]

Double-Edged Sword (noun): something that has or can have both favorable and unfavorable consequences
(Source: Merriam-Webster Online)

With that in mind, I present to you the Upromise World Mastercard by Bank of America.

On one hand, it's a credit card -- an unfortunate accomplice in creating all-too-high debt levels for far too many families. On the other hand, it's an easy tool to save for college. Moreover, it's a way to stash money (that, well,  the cardholder didn't previously have) tax-free into an account.

What's a policy blogger to think?

Last week the Federal Reserve released some long awaited new credit card rules that will provide important new protections for consumers.  They represent some of the biggest changes to the regulation of the credit card industry in decades.  While new restrictions and rules are necessary and long overdue to correct inadequate regulation and abuse of consumers in the credit card industry, there are additional steps that can and should be taken.

Earlier this year, New America published a paper by Michael Barr, Sendhil Mullainathan and Eldar Shafir, which has several interesting proposals to improve financial services regulation, including credit card regulation.  The proposals are based on insights from behavioral economics and include an opt-out credit card, new regulations for late fees, and an opt-out credit card payment plan.

Credit is a critical element to asset building, but credit that is badly structured, difficult to understand, or abusive generally results in the destruction of assets, not their creation. Credit cards and overdraft protection programs have often shared these characteristics-and the asset stripping results.

On Friday, bank regulators will release proposed regulations under Section 18 of the Federal Trade Commission Act concerning unfair and deceptive acts and practices (UDAP). The proposal will apparently be a joint release by the three agencies that have jurisdiction to write rules under the Act, the Federal Reserve, the Office of Thrift Supervision, and the National Credit Union Administration. This will be a rare instance of the agencies exercising rule-making, in contrast to enforcement, authority under the statute.

The proposal, which is expected to cover both credit cards and bounce protection, would require major improvements in practices, including generally limiting credit card interest rate increases to new balances, requiring opportunities to opt out of bounce protection, and prohibiting overdraft and overlimit fees that arise because of holds on debit or credit card purchases. While there will be objections from both the industry-asserting the proposed rules stifle competition-and consumer advocates-arguing that they do not go far enough-this is an extremely welcome development, one long overdue. The agencies have said they intend to make the rules final by the end of the year.

The 75-day comment period will coincide with both Congressional and electoral activity. And of course, year end will be a time of transition no matter who wins the election. It has taken a very long time to get this far; it's important that the regulators finish the job, and finish it strongly.