In its ceaseless quest to protect us from ourselves, Congress in 2009 compelled credit card companies to confirm an applicant’s “ability to pay” before approving an account. Lawmakers evidently believe that Visa, MasterCard, Discover, and the like somehow lack incentive to manage their own credit risk. (As opposed to, say, the elected officials who have racked up $1.2 trillion in national debt this year.)
In any event, the Federal Reserve Board subsequently issued the specific regulations called for in the Credit Card Accountability, Responsibility, and Disclosure Act (CARD). While the title makes for a cutesy acronym, it’s rather odd to use “accountability” to describe a statute that prohibits private companies from acting independently.
Fed Governor Elizabeth Duke was downright proud of the new rules, which she declared to be “an important milestone in the Federal Reserve’s efforts to ensure that consumers who rely on credit cards are treated fairly.”
But the new regulation can hardly be regarded as “fair.” In fact, the law is widely interpreted as prohibiting millions of stay-at-home moms (and a few dads) from obtaining credit cards of their own altogether—just like the 1950s. That’s because the “ability to pay” regulation requires credit card applicants to have an independent source of income to open an account, or else find a co-signer. To wit:
§Ability to Pay.
(a) General rule. (1)(i) Consideration of ability to pay. A card issuer must not open a credit card account for a consumer…unless the card issuer considers the ability of the consumer to make the required minimum periodic payments under the terms of the account based on the consumer’s income or assets and current obligations.
(ii) Reasonable policies and procedures. Card issuers must establish and maintain reasonable written policies and procedures to consider a consumer’s income or assets and current obligations…It would be unreasonable for a card issuer to…issue a credit card to a consumer who does not have any income.
Talk about a “War on Women”!
Credit card companies long ago realized that homemakers make the majority of household purchases—lack of a paycheck notwithstanding. A variety of studies also document that women take fewer financial risks than men, giving them a slight edge on the reliability scale. So, naturally, Congress has made it much more difficult for those with better credit odds to obtain credit. All of which is a kind of Orwellian corollary to putting lawmakers utterly lacking fiscal discipline in charge of the nation’s finances.
Just how the provision squares with marital property laws in some states is unsettled. Meanwhile, some 45,000 outraged moms (and a few dads) signed a petition of protest that has been delivered to the Consumer Financial Protection Bureau. A senior spokeswoman there told Forbes, “Concerns about how the rule may be affecting stay-at-home spouses have been brought to our attention and we are studying the issue.”
This latest regulatory perversion, along with all the other interference in most every aspect of our lives, reflect the arrogance of politicians and regulators who regard citizens as incompetent and who nurture a mistrust of free enterprise. All the while, they claim credit for grand schemes for which the rest of us pay a very high price.