The effectiveness of credit-card regulation for vulnerable consumers.

The Federal Reserve Board has recently adopted a final rule amending the Truth in Lending Act’s Regulation Z, effective October 1, 2001. The first study investigates how vulnerable consumers (i.e. college students) might respond to the revised credit card disclosure requirements and investigates credit card knowledge of college students. The second and third studies examine external validity issues, that is, whether urban college students are more knowledgeable about credit cards than rural students, and whether adult populations are more knowledgeable than student populations. These latter studies further investigate the relationships among objective knowledge, subjective knowledge and product usage. The results show that consumers in general are not very knowledgeable about credit cards. In order to avoid government regulation of the industry, it is recommended that credit card issuers become involved in educating consumers.