Editorial Policy

Government Watchdog Promises Rule Change for Stay-at-Home Spouses

Marcia Frellick

September 28, 2012

Stay-at-home parents who say their access to credit has been restricted by the Credit CARD Act now have the watchdog Consumer Financial Protection Bureau in their corner.

CFPB Director Richard Cordray testified before Congress Sept. 20 that certain wording within the Credit CARD Act of 2009 was causing a “significant problem” for stay-at-home spouses. Under the law, card issuers were to consider only applicants’ individual income instead of household income when making lending decisions.

As a result, stay-at-home spouses who don’t get a paycheck and who rely on the other spouse’s income might get turned down for a credit card if they apply on their own — even if they have stellar credit scores. Of course, spouses can become authorized users on a partner’s credit card, but that misses the point, critics of the rule say.

Stay-at-home mom started petition
One of those most outspoken critics was Holly McCall of Vienna, Va. She posted a petition on the advocacy website Change.org and got more than 40,000 signatures.

In the petition, she stated her case: “It is 2012, and because I’m a stay-at-home mom, I can’t get my own credit card. My husband has to give me permission to get my own line of credit. This is demeaning and flat out unfair. This is despite the fact that I make 95 percent of our household purchases, have an impeccable credit score and handle the majority of my family’s finances.”

Support for challenging the law came from both parties. Reps. Carolyn Maloney, D-N.Y., and Shelley Moore Capito, R-W. Va. (chairman of the Financial Services Committee’s subcommittee that oversees the CFPB), were among those pushing the CFPB to address credit access.

Cordray agreed and appeared before Congress saying, “Tens if not hundreds of thousands” of Americans have been denied access to credit as a result of the rule, based on data the CFPB gathered from the credit card industry.

Unintended consequences
The original intent of the controversial rule was to keep young consumers from using their parents’ income to qualify for credit cards and then accumulating debt they weren’t ready to handle. But others caught in that provision were stay-at-home spouses.

The CFPB’s proposed new regulation has its critics in some consumer advocates who think the law as it is written protects people, even spouses, from racking up unmanageable debt.

National Consumer Law Center attorney Chi Chi Wu was quoted in The Huffington Post in May as saying, “If the stay-at-home spouse opens up a credit card account using the other spouse’s income and then there’s a divorce, she’s now racked up debt possibly without the income to pay it back, putting her in a worse position than if she’d never racked up the debt at all.”

But Cordray is undeterred. He says the agency intends to write a new regulation rather than clarifying the existing law. He said the CFPB would propose the rule before Congress reconvenes after the November election.