CPFB Plans to Give Credit Where It's Due: With the Stay-at-Homes

NEW YORK (BankingMyWay) — The stay-at-home spouse may not be as common as in the 1950s, but there are still millions and millions of them. And as the definition of the family evolves, the stay-at-home partner has to be added to the list. But in some respects credit services are still in the ‘50s, as it’s been devilishly hard for the nonworking member of the household to get a credit card.

The new Consumer Financial Protection Bureau wants to change that.

“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,” CFPB Director Richard Cordray says in a recent statement. “Today the CFPB is proposing common-sense changes that would facilitate credit access for spouses or partners who do not work outside the home.”

The key is that phrase “ability to make payments.” The bureau’s proposal “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.”

What counts as reasonable access? Having a roommate with a job would not be enough. But if the nonworking spouse or partner had access to a joint account into which the working person’s salary was deposited, that would be sufficient, the CFPB says.

The nonworking person could also qualify if he or she had an account into which the working person regularly deposited money. And, in a third example, the nonworking person would qualify if the working person routinely paid the nonworking one’s expenses.

Citing census data, the CFPB says about 16 million married people do not work outside the home, or one person in every three married couples. Live-in partners make the number facing credit-card denials even larger.

During the financial crisis, Congress passed the Credit Card Accountability Responsibility and Disclosure Act aimed at reducing loan defaults by requiring card issuers to make sure applicants had the ability to pay their card bills. But there were some unintended consequences, the CFPB says.

“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,” the CFPB says. “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 CFPB proposal would lower that obstacle. It could take effect early next year after a 60-day comment period.

Of course, many nonworking spouses and partners use cards issued to their significant other. But that means the nonworking person is not creating a credit history of his or her own, which can make it harder to get credit in the future. That’s a serious problem for people who find themselves on their own after a breakup.

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