[author: John L. Culhane, Jr.]

Testimony to Congress earlier this week from Gail Hillebrand, CFPB Associate Director for Consumer Education and Engagement, seems to suggest a way for card issuers to deal with concerns about the Reg. Z rule that the Fed adopted to implement the CARD Act’s ability-to-pay requirement, at least while the CFPB considers whether to change the rule. As we have reported, lawmakers and industry have expressed concerns that the rule particularly disadvantages stay-at-home mothers and other women who do not have independent income but want to open an individual credit card account rather than a joint account. The CFPB is now taking another look at the rule in connection with its review of the comments that were filed in response to its request for suggestions on which regulations should be the CFPB’s  priorities for streamlining.

In her testimony before the House Subcommittee on Financial Institutions and Consumer Credit, Ms. Hillebrand acknowledged the concerns and said the CFPB is working to gather evidence on the rule’s impact on spouses or partners with no or reduced independent income. However, she indicated that, in light of the concerns, the CFPB has “been looking closely at the regulation and the related Commentary…to see if we can provide further clarity to mitigate the risk that stay at home spouses might be denied credit that they can, in fact, afford to repay.” 

In particular, she indicated that doing a debt-to-asset analysis rather than a debt-to-income analysis might be the way to go. Ms. Hillebrand observed that the Commentary to the current Reg. Z rule allows a card issuer to take into account “assets such as savings accounts” when considering the income and assets of the person who will be liable for the card. She also observed that while “the Commentary does not specifically address joint accounts or checking accounts,” the CFPB is “considering options for providing guidance” that would allow a card issuer to consider such accounts as part of an applicant’s assets or “other situations in which money earned by one person is managed or controlled jointly with another and thus should be available to both individuals of qualifying credit.”  

According to Ms. Hillebrand, the CFPB plans to decide this summer how it will deal with these issues. In a statement commenting on the hearings, the American Bankers Association restated its support for a change in the Reg. Z rule and noted that there is broad bipartisan support for changing the rule, with both Financial Institutions Subcommittee Chairman Shelley Moore Capito (R-W.Va.) and Ranking Member Carolyn Maloney (D-N.Y.) among the lawmakers who agree with the ABA’s position.