Current credit card rules may create problems for stay at home parents who are seeking an account of their own, and now the head of one of the most influential banking organizations in the country says that changes need to be made.
One provision of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 states that consumers over the age of 21 applying for a new account must provide proof of independent income sufficient to cover the costs they might incur on their card, according to an editorial by American Bankers Association president and chief executive officer Frank Keating for the Huffington Post. This rule was passed with the best of intentions: to prevent those who could not afford the costs of owning a particular credit card from being able to get it, which could land them in financial difficulties.
But the rule has also had the unintended effect of preventing stay at home parents, who rely on their spouse or partner's income instead of having one of their own, from getting a card at all, the report said. And because of this, there could be considerable financial difficulties for them down the road, particularly if their spouse or partner passes away, or in the event of divorce or separation. That's because they would be burdened with not only having to go find a job of their own, possibly while continuing to raise their children, but also trying to reestablish a borrowing history so they can qualify for more favorable offers.
The largest problem with this rule is that it specifies that the consumer have the "independent" means to pay back their outstanding debts, the report said. Even for consumers under the age of 21, who have their own, more significant hurdles to acquiring credit cards in their own names, do not have to provide proof that they can afford the card independently.
Keating recommends that law- and policymakers - who themselves are weighing the benefits of this rule after considerable outcry earlier this year from consumer advocacy groups representing stay at home parents - change the rules, the report said. One possible solution he recommends would be to make it so that lenders have a fallback option when an applicant's personal income is not considerable enough to afford the card. For instance, if they were able to judge a person's previous borrowing history when their personal income amount isn't sufficient, it may allow those responsible enough in dealing with credit in the past to obtain new accounts that can serve them well in the future.
The Credit CARD Act, as well as the Dodd-Frank Act passed the following year, have had considerable positive impacts for consumers, who have taken the opportunity afforded them by the new regulations to reduce their outstanding debt considerably, and get back on firmer financial ground.
