RSSAn update to the Credit Card Accountability Responsibility and Disclosure Act, or CARD Act, will make it easier for stay-at-home moms or dads to get a credit card.
The CARD Act, which became law in 2009, limits the factors a credit card issuer can consider when evaluating a credit card application. The card issuer is required to determine whether the applicant can reasonably be expected to repay credit card debt. The CARD Act initially prohibited the card issuer from considering income from a spouse when making an ability-to-repay determination.
Consumer advocates complained, noting that many stay-at-home parents depend on income from a spouse to make credit card payments. The CARD Act would make it difficult for them to obtain a credit card in the future.
The Consumer Financial Protection Bureau acknowledged the problem and last October proposed rules to allow card issues to consider a spouse as a source of income for repayment. It received more than 300 comment letters from consumers, retailers, trade groups, banks, credit unions and card issuers.
“Stay-at-home spouses or partners who have access to resources that allow them to make payments on a credit card can now get their own cards,” said CFPB Director Richard Cordray. “Today’s final rule is an example of the Bureau’s commitment to working with consumers and financial institutions in order to ensure responsible access to credit for American families.”
The amendment was announced April 29 and becomes effective immediately. Credit card companies will have six months to comply with the new rules.
For credit card applicants who are 21 or older, the CFPB’s revision allows card issuers to consider third-party income if the applicant has a reasonable expectation of access to it. Although the rule applies to all such applicants regardless of marital status, the CFPB expects that it will ease access to credit particularly for stay-at-home spouses or partners who have access to a working spouse or partner’s income.
Census data indicates that over 16 million married people do not work outside the home. That equates to approximately one out of every three married couples.
The CARD Act amends the Truth in Lending Act, which regulators refer to as regulation Z. Click here for the CFPB’s final rule.
