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Credit card rule change to aid stay-at-home spouses

Holly McCall couldn’t believe her application for a credit card was denied.  She’d never been turned down for credit before. And why should she? Her husband has a stable income and she has an impeccable credit score.

This stay-at-home mom of two, who lives in Vienna, Va., didn’t qualify because she didn’t have any personal income.

“It was demeaning to learn that I would need my husband’s permission to get a credit card,” she said. “I was not just disappointed and embarrassed, I was angry.”

Like many other stay-at-home spouses, McCall was being penalized by unintended consequences of the Credit Card Accountability and Responsibility Disclosure Act of 2009. The CARD Act requires credit card companies to determine if an applicant can make the necessary payments. This was meant to protect students and young adults from getting deep into debt.

Based on the CARD Act, the Federal Reserve issued regulations that credit card issuers should only consider the individual applicant’s income or assets, not the household income (as had been done in the past) when deciding whether to approve the application.

McCall wanted those rules changed. She worked with MomsRising.org to petition the Consumer Financial Protection Bureau (CFPB), the new federal oversight agency, to change the rule. More than 45,000 people signed her online petition.

Last week, the CFPB proposed a rule change that would allow credit card applicants who are 21 or older to rely on third-party income if they have “a reasonable expectation of access” to that money.

“When stay-at-home spouses or partners have the ability to make payments on a credit card, they should be able to obtain a card in their own name,” said CFPB director Richard Cordray in a statement.

If approved, the proposed rule change could give more than 16 million married people who do not work outside the home easier access to credit cards.

“This is a big deal,” said Kristin Rowe-Finkbeiner, executive director and co-founder of MomsRising. “Having stay-at-home parents not being able to build an independent credit history is a problem. This means people who are working at home in unpaid labor are now again able to get credit and not be left out of our consumer society where credit cards are often used.”

The CFPB’s proposed rule change is supported by the American Bankers Association. In a statement, Kenneth Clayton, the association’s vice president of legislative affairs, called it “the right thing to do.” It also has bipartisan support in Congress.

Rep. Carolyn Maloney, D-N.Y., the principal author of the CARD Act, said she is pleased with this “common sense” clarification. “It’s recognition of how modern families truly work,” she said in a statement.

Rep. Louise Slaughter, D-N.Y., ranking member of the House Committee on Rules, said this is “crucial for women who are trapped in dangerous, abusive relationships who have far fewer options if they lack an independent credit history.”

Holly McCall told me she is “thrilled” with the CFPB’s proposal and “amazed” at how quickly the agency responded to her petition

“This is a victory for all stay-at-home-parents,” she said.

Herb Weisbaum is The ConsumerMan. Follow him on Facebook or visit The ConsumerMan website.

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