CFPB Loosens Law, Makes It Easier for Stay-At-Home Spouses to Get Credit Cards

May 1, 2013

Stay-at-home spouses and partners have traditionally had a difficult time getting their own credit card accounts because card issuing banks grant credit based on the amount of income and assets a person has. With no documented income, someone such as a stay-at-home consumer would be out of luck. If they wanted a credit card, they would have to have their spouse co-sign for them. Now the Consumer Financial Protection Bureau (CFPB) has adjusted the laws surrounding this issue, which should give these consumers easier access to credit.

As we reported last fall, the CFPB proposed to change this rule last October, and about six months later, it has made that change. The CFPB has amended existing regulations to state that stay-at-home spouses and partners who are over 21 may count their spouse or partner's income when applying for credit cards. Credit card issuers must now consider this income as the applicant's own when reviewing an application for creditworthiness or when increasing a credit limit.

"Stay-at-home spouses or partners who have access to resources that allow them to make payments on a credit card can now get their own cards," said CFPB director Richard Cordray in a statement. "Today's final rule is an example of the Bureau's commitment to working with consumers and financial institutions in order to ensure responsible access to credit for American families."

The amended regulations are part of the Credit Card Accountability Responsibility and Disclosure Act (CARD Act), a 2009 law that moved to create more transparency in lending and credit reporting. The law stipulated that issuers must make sure a consumer could pay for a credit card before granting one, which led to issuers making that judgment on a person's own income or assets. For those that do not work outside of the home, that meant they often couldn't get credit cards and establish credit in their own name. To get a card, they would have to rely on their spouse or partner to co-sign on the application. While it's an obvious hassle for the applicant, this law also puts the cosigner at risk, because they'd be held liable for any outstanding debts.

When the CFPB was formed in 2011, it took over the oversight of this law from the Federal Reserve. After a lot of pushback from consumers, including a petition on change.org that generated nearly 42,000 signatures from stay-at-home moms who found that working outside of the home didn't pay enough to reap the benefits of a second income, or didn't want to ask their partner to cosign a credit card application, the CFPB looked into the matter further.

The agency eventually that this regulation was unfair to those consumer groups in instances where the stay-at-home spouse or partner has "a reasonable expectation of access" to third-party income. It made a proposal to change the law and opened up a comment line to get feedback. It received over 300 comments from individual consumers, consumer groups, retailers, trade groups, banks, credit unions, card issuers and other financial institutions. The CFPB incorporated this input into its final rule.

The rule applies to all credit card applicants who have access to third-party income, be they married or not; however, it's expected that most of these people are married. The Census Bureau states that some 16 million married people live in a household where one stays at home without having an income of their own. This is approximately one out of every three married couples.

The final rule takes effect when it's published in the Federal Register, the daily record of federal government activity, which will likely be in early May.

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