Compliance Blog

Written by Steve Van Beek

Yesterday, the CFPB followed a NAFCU recommendation (see page 3) and proposed a rule to change 12 CFR 1026.51 of Regulation Z.  The CFPB's press release provides an explanation on how the changes would help stay-at-home spouses and partners:

"The Credit Card Accountability Responsibility and Disclosure Act (CARD Act) became law in 2009.  The CARD Act requires that card issuers evaluate a consumer’s ability to make the necessary payments before opening a new credit card account. Under current CARD Act regulations issued by the Federal Reserve, a card issuer generally may only consider the individual card applicant’s income or assets.

Data made available to the Bureau suggest that some otherwise credit-worthy individuals have been declined for credit card accounts under the current regulation, even though they have the ability to make the required payments.  Discussions with industry sources indicate that a significant number of these individuals may be stay-at-home spouses or partners with access to income from an employed spouse or partner.

The Bureau’s proposed revision would allow credit card applicants who are 21 or older to rely on third-party income to which they have a reasonable expectation of access.  Although the proposal applies to all applicants regardless of marital status, the Bureau expects that it will ease access to credit particularly for stay-at-home spouses or partners who have access to a working spouse or partner’s income."

The proposed rule can be found here.  The summary in the proposed rule is also a useful overview:

"SUMMARY:  The Bureau of Consumer Financial Protection (Bureau) is proposing to amend Regulation Z, which implements the Truth in Lending Act (TILA), and the official interpretation to the regulation, which interprets the requirements of Regulation Z.  Regulation Z generally prohibits a card issuer from opening a credit card account for a consumer, or increasing the credit limit applicable to a credit card account, unless the card issuer considers the consumer’s ability to make the required payments under the terms of such account.  Regulation Z currently requires that issuers consider the consumer’s independent ability to pay, regardless of the consumer’s age; in contrast, TILA expressly requires consideration of an independent ability to pay only for applicants who are under the age of 21.  The Bureau requests comment on proposed amendments that would remove the independent ability-to-pay requirement for consumers who are 21 and older, and permit issuers to consider income to which such consumers have a reasonable expectation of access."  (Emphasis added).

The comment period will extend for 60 days after the proposal is published in the Federal Register.  NAFCU's Regulatory Affairs team will be providing a Regulatory Alert for NAFCU members and soliciting comments on the proposal.