The heat is on for the stay at home parents and it has everything to do with that little part of the 2009 CARD Act that went into effect in early 2010. The clause that addresses those with no income and their ability (or inability) to apply for and receive credit is causing big problems in the financial sector.
This particular aspect of the new law, which requires creditors to assess an applicant’s ability to repay credit card debt before giving it the green light, didn’t go into effect until recently – and the ripple effect is alive and well.
The Federal Reserve rule specifically requires credit card issuers to consider only the individual applicant’s income, rather than household’s total income, when determining ability to re-pay. Naturally, stay-at-home parents don’t have a formal income of their own. This means they cannot apply for and receive their own credit cards without another applicant.
The intent, says the law, is to keep consumers from taking on unaffordable debt. Therefore, according to the Federal Reserve, credit should be granted based on the applicant’s income, not the income of someone who won’t be legally responsible to pay the card bills. Sounds reasonable, right?
Some folks are saying this is a step back into the past when women couldn’t open their own bank accounts, let alone credit accounts, without their fathers or husbands being willing to co-sign the loan. It didn’t matter how much money she made or her ability to repay – it was all about ensuring a sensible male could stay on top of those unpredictable ladies and their irresponsible spending habits.
The idea of that happening today is ludicrous. Women don’t need a husband’s or father’s permission to open an account and in fact, this new law doesn’t even dictate that – it simply says someone who can show reasonable means of repaying the debt must be an applicant. Many stay at home moms have part time jobs – many are able to do them from home, too. If they want a new account and can prove their income, there’s simply no problem.
Some are saying, however, it’s not fair to the working spouse to be obligated to pay bills he might not have even been aware of because he – or she – didn’t apply for the accounts to start with. Others, however, are saying it’s usually the stay at home parent who’s covering all of the household and other financial considerations, so it stands to reason that might be the spouse who’s applying for a credit card. After all, if a stay at home parent – whether it’s mom or dad – walked into a bank and applied for a personal loan, they wouldn’t be approved without showing their own income. If a spouse isn’t on the loan, the spouse isn’t liable for repayment. A credit card should be treated the same way.
Another common denominator many are running into in the media is the concern for domestic violence victims. What will they do if they can no longer get approved for a credit card? The truth of the matter is, the presence or absence of a credit card isn’t a determining factor for anyone who’s being abused. Abused women and men (yes, men) know when they’ve had enough and when that moment strikes, you can be sure the only thing they’re looking for is the door. Shelters routinely see victims come through their doors with nothing more than the clothes on their backs and bruises on their bodies. This aspect of the law plays no role.
First Class Living
The fact is, there are millions of stay at home parents who are a bit disappointed that so many groups have taken to defending them with words like “second class citizens”. Most will tell you they feel fortunate to be able to be at home with the little ones. The fact that their working spouse will need to be a part of any new credit card account is of little concern to them. And make no mistake – we’re hearing from both moms and dads. That’s what happens when you’re living the life you love – there’s no room for pride or sweating the small stuff.
Still, there’s been enough backlash that many petitions have hit the Consumer Financial Protection Bureau (CFPB). Lawmakers are now looking for “solutions”. The only problem is – not everyone sees a problem that needs to be fixed. Those reasons are simple: take a look at the past three years. The recession, foreclosures, bankruptcies, job losses, few improvements and threats of another recession is enough to make anyone – employed or otherwise – to think twice about taking on new debt.