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Restrictions to be lifted on non-earning partners getting credit cards

by Peter Andrew

A clause in the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) of 2009 had a serious unintended consequence. It made it much more difficult -- often impossible -- for spouses or partners who weren't earning incomes in their own right, mostly stay-at-home moms and dads, to apply successfully for their own new credit cards. On Oct. 17, the Consumer Financial Protection Bureau (CFPB), a federal watchdog, unveiled plans to correct this error.

Credit card debt and students

The problem arose from a drafting error. A provision that was meant to protect students who had no income of their own from getting themselves into credit card debt was written so widely that it effectively prevented anyone who couldn't show independent earnings from receiving new cards.

According to a CFPB press release that quoted census data, up to 16 million married people who are full-time homemakers or otherwise not in paid employment could have been affected. That's in addition to unmarried people in long-term partnerships in the same position.

Credit card changes in sight

The press release goes on to describe the bureau's proposal for revising the regulation. It should allow credit card companies to approve applications from people who are age 21 years or over providing they "rely on third-party income to which they have a reasonable expectation of access." The proposed change should apply to all such adults, regardless of their marital status.

Even those most closely associated with the CARD Act seem to welcome the change. On Oct. 19, Congressman Barney Frank (D-Mass), one of the law's architects, issued a statement in which he addressed the restriction that has led to creditworthy adults being turned down for cards:

This was never the Congressional intent and I am very pleased that the CFPB has once again demonstrated its value to consumers by making that clear and by proposing a rule that will fully enable spouses and partners to receive credit cards in appropriate circumstances.

Student credit cards still a problem

Ironically, the same clause that inflicted this problem failed in its real objective. As described early last year in "Student credit cards effectively unregulated," many credit card companies are ignoring the CARD Act's intended restrictions on issuing plastic to kids. True, they insist those kids have an income, although they rarely check claims made on applications, but they count contributions from mom and dad, grants and scholarships, and student loans (yes, really) as income.

Of course, some youngsters are perfectly capable of managing student credit cards well, and can benefit from building their credit scores early. But others soon find themselves in trouble. Perhaps the CFPB should fix that problem next.

Published 10/24/12


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