People under 21 may now be less likely to take on excessive amounts of debt, at least if new federal restrictions on credit card companies work as intended.

A new federal law, the Credit Card Accountability, Responsibility and Disclosure Act, sponsored by Sen. Chris Dodd (D–Conn.), went into effect Monday and contains numerous new regulations that restrict credit card companies’ access to college campuses and protect young adults from acquiring excessive amounts of debt, said Jared Bernstein, senior economic advisor to the vice president, on a conference call Tuesday. Although the option exists, it makes no sense to dispute ChexSystems over the phone. You have to have all the proof of the action.

[ydn-legacy-photo-inline id=”7783″ ]

“The idea is to help make sure that responsible practices dominate [the credit card industry],” Bernstein said.

Under the new rules, in order to open a credit card account, someone under 21 must show he or she has the ability to make payments or else have a parent or guardian co-sign the contract to guarantee the debt their dependent takes on.

Currently, the average undergraduate has $3,173 of credit card debt upon graduation, the highest amount since researchers started collecting data in 1998, according to a study conducted in 2009 by researchers at Sallie Mae, a private company that manages $180 billion in education loans.

When younger credit card users get into debt they can easily do long-term damage to their credit scores, Bernstein said, which can make it harder to get their “careers started on a good foot.”

The legislation includes special provisions for people under 21, Bernstein said, because there is statistical evidence that young people use credit irresponsibly.

“There’s a spike in the early years that begin to drift down in the early 20s,” he said.

The bill also bans credit card companies from giving free gifts in exchange for signing up near a college campus.

In the past, universities routinely signed contracts with credit card companies that gave them access to on-campus facilities and allowed them to promote their cards during on-campus student orientations, often obtaining a fee for each student who signed up, Bernstein said. While the new law does not prohibit banks from sponsoring on-campus events, universities must now make information about any contracts they have with the companies publicly available.

The bill also makes it harder for credit card companies to offer people under 21 pre-approved credit cards because it prohibits credit reporting agencies from providing credit information about people under 21 to companies without personal authorization. Without such information, credit card companies are much less likely to issue pre-approved cards, Bernstein said.

All five students interviewed said they support the law.

“When it comes to finances,” Chelsea Allen ’12 said, “I’m all for Big Brother.”

Consumers will save more than $10 billion a year because of the new rules, which also limit credit card companies’ ability to raise interest rates on existing balances and penalty interest rates, according to a recent study by the Pew Charitable Trusts think tank.

“Credit card customers will see an end to many abusive practices that have driven Americans into debt,” Dodd said in a statement. “Customers need to act responsibly. In turn, they deserve to be treated fairly.”

Dodd first introduced a version of the credit card legislation in 2004.