The Consumer Financial Protection Bureau is in the process of reviewing public comments submitted in relation to the Bureau’s enforcement of the CARD Act, including its controversial “ability to pay” provision.
Congress passed the Credit Card Accountability, Responsibility and Disclosure Act in 2009 to address issues related to the marketing, issuing and processing of credit cards. One of the provisions in the law requires card issuers to consider before issuing a card the applicant’s ability to pay credit card bills. The Dodd-Frank Act transferred enforcement of the rule addressing ability to pay to the CFPB when it went operational in July 2011.
On Dec. 5, 2011, the CFPB issued a request for information seeking public input in its enforcement of the Card Act. The Bureau specifically identified the ability to pay regulation as an area for potential change. The comment period closed March 5, 2012. CFPB accepted public responses to the comments for another 30 days. Receiving several requests for more time to submit comments, the CFPB opened the comment period up for another two month. That period concluded June 4. Since then, the Bureau has been reviewing the comments.
One of the main issues for CFPB to resolve is whether the CARD Act makes it more difficult for stay-at-home moms and students to get a credit card. Rules issued in April 2011 by the Federal Reserve specify that when a consumer applies individually for a credit card account, the issuer must consider the consumer’s “independent ability” to make the payments. Credit card issuers used to ask applicants to state their “household income,” but now they are only allowed to ask for their “income.” Adults who do not earn an income – such as some students and parents – may rely on income shared by another working adult in the home. But if the applicant is not allowed to count that income, it will appear as if they are not in position to pay credit card expenses.
Testifying before Congress on June 6, Gail Hillebrand, CFPB Associate Director for Consumer Education and Engagement, said: “We acknowledged at the time that this rule may have the unintended consequence of precluding some individuals from obtaining credit they are capable of repaying. We sought public comment on whether this specific regulation should be amended and, if so, how.”
Hillebrand said CFPB is committed to three basic principles regarding the CARD Act and ability to pay. First, she said CFPB is committed to promoting access to credit. Second, she said the CFPB is committed to ensuring lenders make only loans that they believe consumers can afford to repay. And third, she said any decision to change the rules should be based on the best available evidence.
Hillebrand said the CFPB has asked a number of credit card issuers to provide specific data related to this issue.
Hillibrand said the CFPB is “looking to see if we can provide further clarity to mitigate the risk that stay at home spouses might be denied credit that they can, in fact, afford to pay.” For example, she said while the rule allows card issues to consider assets such as savings accounts in its ability to pay considerations, it does not mention checking accounts. Sometimes a joined checking account, she noted, can be an important asset in such considerations.
“We also are evaluating whether there are other situations in which money earned by one person is managed or controlled jointly with another and thus should be available to both individuals of qualifying credit,” she said.
“We expect to make a determination soon about how to best proceed on these issues,” she concluded. “We intend to move forward, as appropriate, during the course of this summer.”