CFPB Finally Fixes the “Anti-Housewife” Rule

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Just in time for Mother’s Day, the Consumer Financial Protection Bureau reversed an unpopular rule that some women’s advocacy groups called “insulting”— although it still took the agency almost a year to do it. 

On Monday, the CFPB updated existing regulations so it will be easier for stay-at-home spouses to get credit cards.

Intended to keep credit card companies from giving people more credit than they could handle and letting them plunge into debt, the rule is an object lesson in the law of unintended consequences. It stipulated that issuers would have to take into account the applicant’s individual income rather than household income. Sounds logical…until you realize that it renders every stay-at-home parent who isn’t paid for dishes-and-diaper duty basically uncreditworthy.

This ill-considered rule was part of an amendment to the Truth in Lending Act’s Regulation Z, a CARD Act-era regulation the CFPB inherited from the FDIC. According to the CFPB’s own calculations, more than 16 million Americans, or one in three married couples, could have been affected.

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“I understand that the Federal Reserve is trying to make sure that the person responsible for the credit card can make the payments but did they go too far with this?” SmartCredit.com president of consumer education John Ulzheimer asked when the rule kicked in back in 2011.

A lot of people thought the answer was “yes.” Holly McCall of the group MomsRising.org blogged about the embarrassment she felt getting turned down for a Target credit card in spite of her excellent credit score and her husband’s good job. She launched a Change.org petition that garnered 45,000 signatures and campaigned for the CFPB to change the rule she labeled “demeaning” and “flat-out unfair.” As the issue gained notoriety, lawmakers joined her cause.

At a Congressional hearing last June, Shelley Moore Capito (R-WV), chair of the House Financial Services Subcommittee on Financial Institutions and Consumer Credit challenged the CFPB and said the rule was a threat to women in abusive relationships and could create an added burden on those who are divorced or widowed, or who don’t work while their spouse is serving in the military.

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At that time, the CFPB said “concerns have been raised” about potentially detrimental effects, but it still took nearly a year for the change righting the wrong to become official.

In October, CFPB director Richard Cordray met with the House Financial Services Committee and promised to fix what he called a “significant problem.” Then, the agency announced a proposal that would let credit card applicants at least 21 years old “rely on third-party income to which they have a reasonable expectation of access.” The CFPB received more than 300 comments in response.

Lawmakers voiced support of Monday’s announcement. In a joint press release with Rep. Louise M. Slaughter (D-NY), Shelley Moore Capito (R-WV) and Carolyn Maloney (D-NY) called it a “common-sense clarification” and “recognition of how modern families work.”

8 comments
giantstuffedanimals
giantstuffedanimals

well I guess that gives websites like sugardaddy.com another marketing tool as the bill only requires “rely on third-party income to which they have a reasonable expectation of access.” 

gysgt213
gysgt213

This is good.  So, they must be destroyed.

persuter1
persuter1

I feel like I'm missing something - can't you just have a credit card in both people's names? Or in the breadwinner's name but the other person uses it?

forgottenlord
forgottenlord

@persuter1 

The concern isn't that (well, some of it isn't).  The concern is that it might limit the options of the non-breadwinner if it is a non-ideal relationship.  Also, there are fewer joint accounts and merged assets for newer relationships in part as a recognition of the fact that the divorce rate is 50%.  Throw in concerns of abuse cases where such a limitation grants more power to the breadwinner over the abused

vestafaire
vestafaire

@persuter1 My understanding is that you are liable for cards that have your name on it, but it doesn't build good credit the same way.  This would be a good question to "Ask Suzy".  And legally, you can not use someone else's card.  People do, and don't often to jail for it, but if you have a lover's cc card and things go south, he/she can suddenly go vindictive and hold you responsible for theft of any purchases made after they were pissed at you. It's not a good plan!  Plus, it never builds your good credit, which is key to getting a job now days. My sister-in-law had bad credit and couldn't get hired by 4 major retailer companies because of it!  She managed to get some cc in her name (awful, awful rates.) put them in a drawer and let them build her good credit for her.   She was finally hired last year.  Credit is important.

RickHunter
RickHunter like.author.displayName 1 Like

I can understand the initial reasoning for the way the law was written and this was an unintended consequence... but it should NOT have taken a year to fix.

wenchypoo
wenchypoo like.author.displayName 1 Like

It's about freakin' TIME!  Before the law, I had my own credit rating, even without a job.  All of a sudden, I'm relegated to second-class citizen because I don't work--my husband works, we have investments (some in my name), and the last house we bought had a mortgage issued on the basis of BOTH our credit scores.  For a while, I imagined that when he dies, I'll have to go too, for lack of access to credit, even though there's investment money, and retirement accounts.  I'd still be a non-person in the eyes of the financial world...I'd be BANKED, but still a non-person--even worse than the unbanked.