The Card Act of 2009 along with the Consumer Financial Protection Bureau is responsible for much needed changes to the financial industry. In fact, consumers have generally been happier with their credit cards according to a J.D. Power and Associates survey conducted in August 2012.
The aspects of credit cards consumers are happier with can be attributed to the Card Act of 2009 and financial regulation. But one part of financial regulation has caused credit cards to be less accessible to stay-at-home moms and has made it difficult for them to obtain credit cards in their own name.
The issue is a requirement that credit card companies consider consumers’ independent income, rather than their household income, when making a decision to extend credit.
In early September 2012, the Consumer Financial Protection Bureau (CFPB) said it will propose changes to regulations that adversely affect stay-at-home moms from obtaining credit cards.
Richard Cordray, the Director of the CFPB said at a hearing of the House Financial Services that, “We will need to engage in rulemaking. We have made a determination to proceed.”
At issue is the regulation which states the card issuer may not determine a customer’s ability to repay by relying on income or assets of a person who is not liable for the debt unless the applicant has an ownership interest in the other person’s assets or income.
In a bi-partisan effort, members of Congress, Representatives Carolyn Maloney, a New York Democrat, and Shelley Moore Capito, a West Virginia Republican, made the case that the regulation could limit credit card accessibility of stay-at-home spouses.
The limit on nonworking members of a household “was certainly not the intent of the legislation,” said Rep. Carolyn Maloney (D., N.Y.) during the hearing.
“This rule could be punitive for women who are in a failing marriage or in abusive relationship,” said Rep. Shelley Moore Capito (R., W.V.).
In May 2012, Holly McCall, a stay-at-home mom negatively affected by the regulation, hand-delivered thousands of signatures from a petition requesting the CFPB fix the law. McCall says she was denied a credit card in her name only due to lack of individual income.
“It’s 2012 and I have to ask my husband to get my own credit card,” Ms. McCall said. “I make 95% of our household purchases, and have a nearly perfect credit score…”
Cordray agreed and stated “We have determined that it is a significant problem.” He added that “tens if not hundreds of thousands” of Americans have been denied access to credit as a result of the rule. “This is clearly an unintended consequence.”
The regulation not only prevented stay-at-home spouses but also retirees and other consumers from obtaining credit cards. Credit card approval rates have declined for women, particularly for women age 62 and over, a group that often relies on a spouse’s retirement funds for income.
After months of collecting data and information from the credit card industry it was determined that a regulation was needed to address this issue. Once the regulation is tweaked, stay-at-home spouses and other consumers adversely affected; will have easier access to credit cards in their own name as well as larger lines of credit.