The Consumer Financial Protection Bureau announced its proposal to allow stay-at-home spouses and partners easier access to open credit accounts. The rule would consider shared income from a working spouse or partner when applying for a credit card account.
“When stay-at-home spouses or partners have the ability to make payments on a credit card, they should be able to obtain a card in their own name,” said CFPB Director Richard Cordray Oct. 17. “Today the CFPB is proposing common-sense changes that would facilitate credit access for spouses or partners who do not work outside the home.”
Currently, under the provisions of the Credit Card Accountability Responsibility Disclosure Act (CARD Act) designed to prevent students from obtaining credit they do not have the ability to repay based on parental income, anyone who does not earn their own income is limited in establishing a credit account. Therefore, stay-at-home spouses, often those who are raising children or managing a household but do not hold a paying job outside the home, may be declined for credit in spite of stellar credit scores and substantial household income. The rule had the unintended consequence of discriminating against, for the most part, women—who more often than men play such a role in the household.
“This is an excellent first step forward in solving the unintended consequence of otherwise creditworthy stay-at-home spouses being denied credit solely because they do not have an independent income,” said revision champion Shelly Moore Capito (R-W. Va.), chairwoman of the House Subcommittee on Financial Institutions and Consumer Credit. “As I have said before, without a change, this rule could be especially punitive for women who are in a failing marriage or abusive relationship.”
The proposed revision would not completely eliminate the previous rule, rather implement a “reasonable expectation of access rule,” determining if household income could be considered based on three criteria:
- If the wage earner’s salary is deposited into a joint account
- If regular funds transfers are made into the non-working spouse’s or partner’s account
- If the applicant receives benefits from the income
By implementing the new rule, the CFPB will still ensure that household members who do not benefit from the wager earner’s income, such as roommates or adult children, cannot open credit based on that income. The proposal will apply regardless of the applicant’s marital stutus.
Rep. Carolyn Maloney (R. N.Y.), ranking member of the House Subcommittee on Financial Institutions and Consumer Credit and author of the CARD Act said she is pleased with the CFPB’s clarification.
“It’s recognition of how modern families truly work,” Maloney said. “If a spouse stays at home, but participates in a household’s financial decisions and has ‘reasonable expectation of access’ to the household income, then the spouse should be able to obtain a card.”
The issue was brought to the national forefront after Holly McCall’s, a stay-at-home mom, credit card application was declined, despite her “impeccable” credit score. McCall’s campaign for the change on both Change.org and MomsRising caught government official’s attention.
“We want to thank our member, Holly McCall, for drawing attention to this problem and Congresswomen Carolyn Maloney and Shelley Capito for their work to get the rule changed. We also thank our members and the more than 40,000 moms and others who signed our petition protesting the law for their efforts,” said Kristin Rowe-Finkbeiner, executive director and CEO of MomsRising.
The most recent U.S. Census indicates more than 16 million married people do not work outside the home. Based on that count, one out of every three married couples will benefit from the proposed CARD Act rule change.
Still, the provision has its proponents. Odysseas Papadimitriou, chief executive officer of cardhub.com, stated in a news release the proposal may sound beneficial, but it will actually make it more difficult for creditors to know what applicants are qualified.
“The fog of shared income makes it harder for underwriters to see which applicants are truly qualified, thereby preventing some deserving consumers from garnering approval and allowing those who cannot afford their new financial obligations to obtain credit lines that can only get them in trouble,” he said. “When this happens on a large scale, we see the kind of widespread over leveraging that leaves us extremely vulnerable to any economic turbulence.”
Instead, Papadimitriou said the CFPB should require credit card companies to accept joint applications.
“This would enable issuers to evaluate whether a couple’s combined income and debt obligations enable them to afford a new line of credit and since both parties will list their individual Social Security numbers on the application, usage of information will be relayed on both parties’ credit reports,” he noted.