Stay-at-home spouses have the right to credit
When the landmark Credit Card Accountability, Responsibility and Disclosure Act became law in 2009, it was a long time coming.
Finally, consumers would have protection against what critics said were abusive practices by credit card issuers, including retroactive interest rate increases, due dates that jumped around each month and arbitrary rate increases.
But as with many new regulations, there were unintended consequences.
One provision of the law requires credit card issuers to consider an applicant's ability to pay before issuing a card.
The Federal Reserve, which was first charged with implementing the law, amended the regulations to specify that when a consumer applies for a credit card, the issuer must consider the applicant's “independent ability” to make the payments.
You can imagine what came next. The Consumer Financial Protection Bureau, to which responsibility for the regulation was transferred, started hearing concerns that the rule could have the effect of limiting access to credit for a stay-at-home spouse or partner who wants to open an individual account.
“In some families, all of the adults are employed outside the home,” Gail Hillebrand, associate director of the consumer bureau, said in congressional testimony. “In others, someone stays at home or works part time. This is often, although not always, a woman.”
To its credit, the consumer bureau said it will draft a proposal this year to address the provision.
“This is clearly an unintended consequence of the legislation,” bureau Director Richard Cordray told members of the House of Representatives' Financial Services Committee.
Good move. Stay-at-home spouses shouldn't be denied credit just because they choose to care for their children full time.
“We recognize that stay-at-home spouses have significant financial responsibilities and play an important role in the U.S. economy,” the consumer bureau said in a statement.
To be fair, the rule's premise makes sense.
“You don't want people who don't have money to get into a lot of credit card debt and then default on it,” said John Ulzheimer, president of Consumer Education at SmartCredit.com and an expert on credit reporting and credit scoring.
Stay-at-home spouses are often the chief financial officers of their household and manage the resources well, showing they are good credit risks. So, the stay-at-home spouse should have the same access to credit, the same benefits of the household income, as the spouse who's drawing a paycheck.
“In some cases the inability to apply for in-store credit card offers causes the consumer to pay more for goods because they don't enjoy the common 10 to 20 percent discounts offered by retail credit card issuers,” Ulzheimer said.
How to fix the rule? Easy, Ulzheimer said.
“All they need to do is to allow a credit card issuer to consider household income vs. requiring a credit card issuer to only consider individual income,” he said. “You're eliminating this provision that makes absolutely no sense, but still retaining the spirit of the provision and the hypothesis of the provision, which is to keep people who have no access to money from getting into debt and getting into trouble.”
It's the right thing to do, and for the record, this isn't a gender issue because there are stay-at-home dads.
Pamela Yip is a personal finance columnist for the Dallas Morning News.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Pilot in Atlantic Ocean crash lost consciousness, Coast Guard says
- Steelers opt for youth, speed while revamping roster
- Steelers finalize 53-man roster
- Pirates’ Polanco runs into rookie wall
- Pitt cruises past Delaware in season opener
- Pirates edge Reds, 3-2, for 4th consecutive victory
- Biertempfel: First base becoming new hot corner for Pirates
- Pitt notebook: Offensive linemen rotate during rout over Delaware
- 3 wrecks Saturday keep emergency responders busy
- Former Steelers linebacker Harrison retires
- Starkey: Pitt does its duty