November 25, 2020

Bucks: Stay-at-Home Moms and the Need for Credit

Paul Sakuma/Associated Press

If you are a stay-at-home mom (or dad) and want a credit card, you should consider applying for one, pronto. A pending change in the way card companies must evaluate applications will probably make it much harder for people who don’t have their own, independent income to get one.

As part of a clarification of the Credit Card Act of 2009, the Federal Reserve board has made it tougher for stay-at-home spouses to get their own credit cards. (Discussions of the Fed’s rule can be found in U.S. News World Report’s Alpha Consumer blog, and on creditcards.com.)

The Card Act has many provisions that help protect consumers, like requiring credit card companies to give you advance notice before slapping you with a double-digit penalty interest rate. But in its final comments on the law, published earlier this year, the Fed told credit card companies that they must consider “individual” income, not “household” income, on credit applications. That means that in most situations, a nonworking spouse won’t be able to obtain credit based on their husband’s or wife’s income, as they can now.

In explaining why this is O.K., the Fed said it believed “married women who do not work outside the home” will still have access to credit because they can apply for joint accounts with their husbands, or become authorized users on their husband’s accounts. The board did concede that applying jointly might be “inconvenient or impracticable” in some situations, like applying for on-the-spot credit at a retail store. But the move is necessary, the Fed said, to make sure the person holding the card can actually pay the bill.

The problem is that nonworking parents do have the ability to pay, through their spouse’s income. (And anyone who has children knows full well that he or she is working — they’re just not getting a paycheck.)

All this struck a nerve with me recently, because of a problem that arose with an account I hold with my husband. A few years back, he got a new credit card so he could rack up frequent-flier miles. Even though I was working full time and had my own set of plastic, he got a “companion” card for me, so we could pool our spending and earn miles faster. I’ve used it often, without thinking much about it.

Until last week, that is. I had a question about a statement fee and called the card company — only to be told that the assistant couldn’t discuss it with me without first obtaining my husband’s permission.

I was speechless. I began supporting myself financially in my early 20s. I have my own credit history and credit score. Yet, I was being told that I couldn’t be taken seriously without a say so from a man (albeit, one of whom I’m exceedingly fond). It felt like a scene from the “Mad Men” era.

When I insisted, the representative partly addressed my question, but said a full review would require spousal approval. For me, the incident provided a good laugh and an anecdote for a blog post. But for an at-home mom in, say, a deteriorating or possibly even abusive relationship, it could be devastating. Forcing such women to piggyback on a husband’s account means that she is still subject, to an uncomfortable degree, to his oversight — which strikes me as an unhealthy step backwards on the long, hard-fought road to gender equality.

Card companies must comply with the law on Oct. 1, but they can begin enforcing it before then if they choose.

Representative Carolyn B. Maloney, a New York Democrat and an author of the Card Act, has said the Fed’s rule exceeds the law’s intent. Originally, strict “ability to pay” restrictions were meant only for applicants under 21, to help prevent college students and other young people from getting into debt. She and three other members of Congress have asked the Fed, along with the new Consumer Financial Protection Bureau,  to study the new standard for six months after it is adopted, and to make changes if it turns up any negative effects on stay-at-home spouses.

“We are sure the board understands that it was never the intention of Congress that there would be any impact on stay-at-home spouses, ” the letter says, “and that we should make sure that that is in fact the case.”

A lawyer from the Fed’s Division of Consumer Community Affairs wasn’t immediately available to comment.

What do you think about the  rule? Should nonworking spouses be able to obtain credit in their name alone?

Article source: http://feeds.nytimes.com/click.phdo?i=f806a65b8fb160b1da40153390bc5232

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