Today's Trends in Credit Regulation

Federal Reserve Board Approves Rule to Limit Use of Household Income for Non-working Spouses
By Anne P. Fortney

The Federal Reserve Board has issued final rules amending the Regulation Z provisions that implement the Credit Card Accountability Responsibility and Disclosure Act of 2009 (the “Credit Card Act”). One amendment would preclude a stay-at-home spouse, who is most likely to be the wife, from establishing credit in her own right. As a result, the amended rule would resurrect barriers to credit for married women that Congress abolished almost forty years ago when it enacted the Equal Credit Opportunity Act.

The Credit Card Act requires card issuers to consider a consumer’s ability to make the required payments on the account before opening a new credit card account or increasing the credit limit on an existing account. The Board’s amended rule states that credit card issuers generally cannot request a consumer’s “household income” because that term is too vague to allow issuers to properly evaluate the consumer’s ability to pay. Instead, issuers must consider the consumer’s individual income or salary. This rule effectively limits access to credit for non-working spouses, as the Board’s rule does not allow them to claim “household income,” which includes the income of a working spouse.

The Board based the final rule primarily on its belief that the purpose of the Credit Card Act ability to pay rules was to prevent the kinds of abuses in the card industry that existed in the subprime mortgage industry. The language of the Act does not support that interpretation. The Board cited no legislative history or data supporting its conclusion.

The Board also relies on consumer groups’ statements that the final rule will protect consumers, in the event of divorce, from lacking sufficient income to make payments on debts incurred during a marriage. The consumer groups submitted no data indicating that consumers currently experience this problem when they incur individual credit card debt in reliance on household income.

The Board discounted comments from retailers, card issuers, trade associations, members of Congress and consumers as to the rule’s adverse effect on access to credit, particularly for stay-at-home spouses and military families. The Board noted that these commenters failed to “submit data supporting” their statements. The Board overlooked the fact that the industry failed to submit data on the effect of its rule because it is a new rule.

The Board apparently has a new standard for an FRB rule – the Board will issue a rule based upon its beliefs and consumer groups’ assertions unless the industry and members of Congress can submit data in support of their statements as to the adverse effect of a rule that has never been in effect.

We definitely live in interesting times.

Anne P. Fortney is a partner in the Washington, D.C., office of Hudson Cook, LLP. Anne can be reached at (202) 327-9709 or by email at

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