When I first started school we were required to have 7-8 characters as well and the reasoning was in the faq: certain systems had not been upgraded to handle more than 8 characters which was interesting, I'm assuming it was certain computer terminals that hand't been upgraded as the restriction is now at 20 or 30 characters.

But they had a similar way to increase security as your online application:

Must contain 3 groups:

- uppercase

- lowercase

- numbers inserted in between normal characters

Special characters were optional but welcome.