The Credit CARD Act passed Congress in 2009 and increased transparency in the credit card industry, made billing a more fair process, and limited to whom credit-card issuers could lend and market their products. But the rules have had an unanticipated effect on stay-at-home spouses, a matter that is currently up for debate in Washington.
Last Wednesday, the House Committee on Financial Services held a hearing on the matter, which stems from a disconnect between the language of the bill and the bill’s actual intent. By requiring that lenders consider an individual’s ability to repay debts independently, the law was meant to limit credit card companies’ ability to issue cards to college students who might lack the ability to repay without help from Mom and Dad.
An unintended consequence of the legislation is that spouses who stay at home while their partner works cannot get credit cards of their own. Having no personal income, they technically have no independent means to repay loans, even if their household income and credit history are solid.
Frank Keating, president and CEO of the American Bankers Association, wrote in the Huffington Post: “This is not the result Congress intended.”
Furthermore, Keating points out, this part of the CARD Act is at odds with the Equal Credit Opportunity Act, which was passed in 1974, and prohibits discrimination by creditors based on customers’ race, age, religion, marital status, etc.
By preventing spouses who choose to raise a family instead of working outside the home from accessing new credit cards, the CARD Act, in a sense, discriminates against them. This potentially affects husbands and wives with spouses in the military who are serving abroad, and might potentially help keep battered women in abusive relationships.
Representative Shelly Moore Capito, from West Virginia, told Politico: “I think it’s particularly harmful to military spouses back at home who need to establish a credit footprint”
In her testimony, she said the USAA stated that “nearly 50 percent of military wives do not work.” And furthermore: “This rule could be especially punitive for women who are in a failing marriage or abusive relationship. One of the fundamental steps necessary to escape from one of these unfortunate situations is establishing and maintaining credit history.”
Congresswoman Capito has prepared draft legislation that would amend the Truth in Lending Act to “require card issuers to also consider a spouse’s ability to repay when determining a consumer’s application for a a credit card or increased credit limit.”
The Consumer Financial Protection Bureau is currently “reading through” the comments it has received on the ability to repay rule and its negative effects, according to the Credit Union National Association.