Consumer Financial Protection Bureau (CFPB) Director Richard Cordray told U.S. House Financial Services lawmakers the agency has decided to move forward with a proposed rule intended to help stay-at-home spouses who found it difficult to obtain credit after the Federal Reserve promulgated regulations implementing the CARD Act. The bureau’s proposal will likely be released before lawmakers return from their month-long break leading up to the November elections, Cordray said during a recent hearing.
The CARD Act states that a credit card issuer cannot open an account for a consumer unless the issuer “considers the ability of the consumer to make the required payments.” In February 2010, the Fed issued regulations specifying that when a consumer applies individually for a credit card account, the issuer must consider the consumer’s “independent ability” to make the payments. The Fed also released official commentary indicating the issuer generally may not rely on income or assets of a person who is not liable for the debt on the account. The CFPB inherited the rule last summer under the Dodd-Frank Act.
Advocacy groups argued that requiring issuers to consider individual, rather than household income unfairly impacts stay-at-home parents. Two groups delivered more than 45,000 signatures on a petition to the CFPB to reconsider the ability-to-repay rule earlier this year.
Lawmakers on both sides of the aisle, including Reps. Carolyn Maloney, D-N.Y., and Shelley Moore Capito, R-W.Va., pressured the bureau to take action. The House Subcommittee on Financial Institutions and Consumer Credit –– chaired by Capito –– considered the matter at a hearing on June 6.
At that time, Gail Hillebrand, associate director of consumer education and engagement with the CFPB, told lawmakers the agency would work carefully to determine how best to proceed.
When Cordray appeared before the full committee for a Sept. 20 oversight hearing, a frustrated Maloney took the opportunity to press the issue.
“I know you say you’re working on it, but we certainly don’t want to legislate it, if we wanted to legislate it we would have done it by now,” she said. “We made it a top priority of the subcommittee, the committee and it’s a priority on both sides of the aisle. I also would say it’s a women’s issue. So when are you going to have a draft?”
“We first had to determine whether we could proceed by rule or whether the statute itself had to be changed,” Cordray noted. “This is clearly an unintended consequence of the legislation and the regulatory process. It is not an uncomplicated issue. There are a number of issues here that have to be sorted through, but we have determined that we will proceed with rulemaking.”
This isn’t the only ability-to-repay rule the agency is working on. Under Dodd-Frank, the CFPB must write rules requiring mortgage lenders to assess their borrowers’ ability to repay before extending credit. The agency said it plans to complete those rules ahead of a January 2013 deadline.