CFPB’s Proposed Rule Improves Stay-At-Home Spouses’ Ability To Get Credit Cards

Blog posted by John Zasada 

The Consumer Financial Protection Bureau (CFPB) issued a proposal on October 17 which would change the current ability-to-repay rules under Regulation Z. Currently, Regulation Z does not permit a credit card issuer to open a credit card account for a consumer, or increase the credit limit on the account, unless the card issuer considers the consumer’s ability to make the required payments.

Specifically, Section 1026.51(a) states a “card issuer must not open a credit card account for a consumer under an open-end (not home-secured) consumer credit plan, or increase any limit applicable to such account, unless the card issuer considers the ability of the consumer to make the required minimum periodic payments under the terms of the account based on the consumer’s income or assets and current obligations.”

Each borrower’s ability-to-repay is considered independently, without regard to joint checking or savings/shared accounts. As a result, this negatively impacts spouses who do not work outside the home and who want to qualify for a credit card.

“Common sense” change

The CFPB is proposing to eliminate the requirement for independent ability-to-repay, thereby giving stay-at-home spouses the opportunity to obtain a credit card by allowing them to rely on the shared income from their spouse. The CFPB refers to this as a “common-sense” change.

Based on significant evidence, it was apparent to the CFPB that under the current ability-to-repay rules, many otherwise credit-worthy individuals have been turned down for credit cards, despite being able to make the required payments. It’s no surprise that the majority of these individuals are stay-at-home spouses with a gainfully employed spouse. About one out of every three married couples could be potentially impacted by the change.

Read the proposal at the CFPB’s website.