By Tami Min
It seemed harmless at the time. It was just one credit card, and everyone else was signing up. The first one she got was an American Express card in 1995. Then she got a Citibank Visa card and a Mastercard that same year. She said frequently companies would congratulate her and increase her credit limits.
By the time Cassandra Chae graduated from UCLA and came back from a trip to England in 1998, she had racked up almost a dozen credit cards and owed about $8,000, plus interest.
It was agonizing me forever, she said. When you realize you cant pay your bills and you still need money, thats horrible.
She wasnt alone. The 26-year-old Los Angeles resident remembers how easy it was for students to get credit cards.
You didnt need anyone to co-sign that was tempting, she said.
She signed up for the cards through the mail and at booths on campus, where people were giving out free merchandise, such as candy, mugs and water bottles.
Students would just flock over, she said.
For the last two years, the Public Counsel Law Center in Los Angeles, the largest pro bono law office in the country, has been counseling students who are facing the consequences of their credit card buying sprees.
The aftermath: thousands of 20-somethings are declaring bankruptcy.
Last year, Public Counsel, which provides various kinds of free legal services to some 10,000 clients each month, saw the number of 18- to 29-year-olds declaring bankruptcies balloon. From July to November 2000, that category increased from 10 percent to 37 percent of their clientele.
In 1999, the Southern California area, which falls in the Central District of the court system, had by far the most number of personal bankruptcies in the country. Nearly 81,000 people filed for Chapter 7 that year. The second highest was in the Northern District of Illinois, which had about 30,000.
In 2000, nearly 63,000 people filed for personal bankruptcy throughout Southern California.
At Public Counsel, volunteer lawyers who speak Asian languages, including Tagalog, Chinese, Korean and Mandarin, are needed, said Maggie Reyes Bordeaux, staff attorney for the groups Debtor Assistance Project.
When people call for help, they say things like: Please dont think Im a bad person. Creditors are calling me. Can they take me to jail? Bordeaux said. Theyre scared.
Daniel Grunfeld, president and CEO of Public Counsel, said part of the problem with credit cards and younger people, mostly 18 to 25 years old, is the generation factor.
They do not have a conscious memory of bad economic times, he said. Because you have not seen what its like bad, theres more aggressive spending when its good.
Chae fell into the habit of over-spending during college, even though her parents, who immigrated from Korea during a time of recovery from the Korean War, set an example of conservative spending.
My mom and dad have always hated the fact that they had to take out a loan for the house, she said. Their whole focus in life is to pay off debts. They barely ever use their credit cards.
Most Asian parents are that way, she said.
Once Chae left her parents home in Irvine, a suburb of Los Angeles, for college, it was a different story. For many second-generation Asian Americans who have grown up in the United States during prosperous times and with the hopes of an even higher living standard after getting a college education, their consumption behaviors far surpass that of their parents.
Even though her parents paid for everything, including tuition and rent, and gave her an allowance, it was easy finding ways to use credit cards. It took two years of living back at her parents home and working full-time at a job where she earned about $27,000 a year, in order to pay off her credit card debts.
Recently, she found inside a closet a bundle of new nylons she bought during college.
I never wore nylons! she said.
She looks back now, and realizes during school, almost all of her purchases were for recreational pursuits: anything from CDs, clothes, restaurant bills, and sometimes just cash to pay for cover charges and other expenses at bars and clubs. After all, Koreatown, with a bustling nightlife targeting young Asian Americans, is close to UCLA.
Grunfelds caution to students and other consumers: credit cards are not free money.
And bankruptcy, which follows you on your credit record for 10 years, should be avoided, if at all possible. Especially now, since two bankruptcy reform bills, approved in March by Congress and expected to be signed by President Bush, are going to make it more difficult for individuals to file for Chapter 7 bankruptcy. Chapter 7 allows a person to walk away from most of their debts, including credit cards.
The new legislation, for which credit companies have lobbied, would require those in debt to file for Chapter 13, a type of bankruptcy that requires more repayment. Credit card debts were not a part of this repayment plan, but they would be with the two reform bills.
Grunfeld and Bordeaux said the bills are unfair, however. For one, they require scrutiny of a persons last six months of employment to calculate if they can repay their debts. But many of those considering bankruptcy, though they may have been earning money for the last five to six months, are unemployed by the time they file.
Public Counsel offers help to low-income consumers, provides referrals to credit counseling and other services, and conducts free legal clinics on various consumer issues. For more information visit www.publiccounsel.org.