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Consumer Financial Protection Bureau to Suggest Modifications to Income Requirement of CARD Act

On September 20, 2012 Richard Cordray, the Director of the Consumer Financial Protection Bureau or “CFPB”, said that he was going to propose a new rule that would effectively eliminate the individual income requirement for consumers who want to apply for a credit card.  

The current rule, which was validated by a Federal Reserve regulation, demands that credit card issuers cannot use an applicant’s household’s income in lieu of individual when complying with the requirements of determining a consumers’ capacity to repay their bills. The rule has received an immense amount of criticism because of the byproduct of disallowing non-working spouses from being able to get credit cards despite having access to their household’s income generated by a working spouse.

The impact is clearly disproportionately impacting stay at home mothers but can just as easily have the same impact on stay at home fathers.  The rule also prevents credit card issuers from opening cards for applicants who want to open cards at retail outlets in order to get discounts on their purchases.

One of the most difficult things for a credit card issuer to do is to obtain a new customer.  And, according to Cordray the CARD Act rules have prevented possibly hundreds of thousands of consumers from opening new cards.  A change in the regulation has gotten bi-partisan support, including support from the original architect of the CARD Act, Carolyn Maloney (D – New York).     

The CARD Act also disallows credit card issuers from opening new accounts for consumers who are under 21 unless the applicant has a job or a co-signer. The provision has been panned as being ineffective and even acts as an incentive for applicants to lie on their credit applications, which is illegal, or ask friends to co-sign, which is problematic because both parties are then liable for payment.
“The Credit Guru”, Longtime FICO Insider & Credit Industry Authority President Of The Ulzheimer Group, LLC
John Ulzheimer is a nationally recognized expert on credit reporting, credit scoring and identity theft. He is the President of The Ulzheimer Group, the Director of Credit Education at DisputeSuite.com, Credit Expert at CreditSesame.com and the credit blogger for Mint.com. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. He has served as a credit expert witness in more than 150 cases and has been qualified to testify in both Federal and State court on the topic of consumer credit. 

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