The Credit CARD Act of 2009 ushered in a slew of new protections for credit cardholders, but it also led to some unintended consequences. One of the biggest was the clause that can be thought of as the “stay-at-home-mom penalty,” and the Consumer Financial Protection Bureau now says it’s going to fix that.
Intended to prevent card issuers from giving people more credit than they could reasonably handle, the law stipulated that credit card companies had to look at individual income rather than household income. Even many people who supported the CARD Act had a bone to pick with this because it effectively rendered stay-at-home spouses or parents uncreditworthy.
The CFPB took legislative responsibility for the CARD Act from the Federal Reserve, which wrote the original rule pertaining to individual income, when it began operations last year. Following a Change.org protest that gathered 45,000 signatures in favor of changing the rule, the CFPB started looking at the problem this rule presented earlier this year.
At a Congressional hearing in June, Shelley Moore Capito (R-WV) argued that the rule is harmful to women who are divorced, widowed or in abusive relationships, since they can’t get credit without a co-signer if they don’t work outside the home.
In testimony with the House Financial Services Committee on Thursday, CFPB director Richard Cordray said the agency will use its rule-making authority to correct what he called “clearly an unintended consequence” of the CARD Act that could have led to as many as hundreds of thousands Americans being denied credit. “We have determined that it is a significant problem,” he said, telling the Committee that the agency will submit its fix after the presidential election in November.
“Stay-at-home moms shouldn’t have to ask their husbands for permission to get a credit card, and I’m glad to hear Director Cordray agrees,” petition-starter Holly McCall told the Credit Union Times. “It’s so heartening to see a big government agency like that respond directly to the voices of consumers across the country.”