Old Enough to Fight, Old Enough to Swipe

Young entreprenuers may be face-to-face with a critical, career-hindering problem–the inability to acquire a credit card–compliments of the Federal Credit Card Act. 

Andrew A. Schwartz, University of Colorado Law Professor and author of “Old Enough to Fight, Old Enough to Swipe: A Critique of the Infancy Rule in the Federal Credit Card Act“, chats with PYMNTS.com about how this rule would greatly hamper the possibilities for young adult entrepreneurs in the United States.

For those who might not be aware, historically, where have we seen an “infancy rule” in U.S. legislation, and what were the reasons for including a similar clause in the CARD Act?

The “infancy” doctrine holds that children cannot be held to contracts that they sign. For a proper contract to exist, both sides must possess the requisite mental “capacity” to bind themselves, and an infant (like someone who is mentally ill or blind drunk) lacks that capacity due to his lack of maturity and experience.

The CARD Act included an infancy rule for this same reason, namely that children cannot be trusted to use a credit card responsibly.

Explain how the CARD Act’s “infancy rule” would inhibit the potential of young adults.

Under medieval English law, one was deemed to be an infant until age 21. In the late 20th Century, however, every U.S. state lowered this age to 18, essentially on the ground that if a person is old enough to be drafted into military service, he is old enough to bind himself to a contract.

This change in the law had a profound impact on our society by creating a new class of youthful entrepreneurs. The old rule had the practical effect of denying those younger than 21 the ability to launch their own business, but the reforms empowered 18- to 20-year-olds to found a start-up company. Famous examples include Bill Gates and Mark Zuckerberg, who founded Microsoft and Facebook, respectively, at the tender age of 19.

The CARD Act’s infancy rule brings us back to the bad old days when Gates and Zuckerberg would have been treated as children and not been allowed to contract for a credit card. And, because credit cards are an important source of funding for early-stage entrepreneurs, the CARD Act’s rule inhibits the ability of contemporary 19-year-olds to follow in their footsteps.

What people/organizations have spoken out against the inclusion of the rule? Who supports it?

Students have spoken out against the new infancy rule in college newspapers, as cited in the article.

What changes are needed make the CARD Act more palatable to the masses, specifically young adults?

The infancy rule (Section 301) should be repealed. Thanks to the broadly popular, bipartisan reforms of the late 20th Century, 18-year-olds are now treated by the law as adults in terms of voting, jury service and contracting (apart from credit cards). The CARD Act should treat them the same way.

Andrew Schwartz teaches and publishes on Contracts, Corporations and other aspects of business law.

A native New Yorker, Professor Schwartz studied Civil Engineering at Brown University and then attended Columbia Law School, where he served on the Columbia Law Review and assisted the late Professor E. Allan Farnsworth on his leading Contracts treatise. At Columbia, he was awarded the Class of 1912 Prize for Contracts, earned a Certificate of Achievement from the Parker School of Foreign and Comparative Law, and was thrice named a James Kent Scholar.

Prior to joining the Colorado Law faculty, Professor Schwartz clerked for Judge William A. Fletcher of the United States Court of Appeals for the Ninth Circuit and Judge Naomi Reice Buchwald of the United States District Court for the Southern District of New York, practiced for several years with Wachtell, Lipton, Rosen & Katz, a leading global business law firm based in midtown Manhattan, and lectured at UC Berkeley School of Law. He is admitted to practice in New York and before the United States Patent and Trademark Office.