In a Monday letter, the American Bankers Association expressed support for the CFPB’s proposal to reconsider the Federal Reserve Board’s interpretation of the ability-to-repay provision under the Truth in Lending Act.
The proposal amends Regulation Z to eliminate the requirement that individuals 21 years of age and older to demonstrate an “independent” ability to obtain credit, which will allow stay-at-home spouses equal access to credit in their own names and the ability to build a credit history without having to rely on their partners.
Under TILA, issuers are prohibited from issuing credit cards to individuals under 21 unless the applicant can provide information demonstrating an “independent” means of repaying any financial obligation. Before an individual 21 years of age or older can open a credit card, the issuer must consider the “ability” of the borrower to make required payments.
The ABA said that the Fed’s interpretation of the statute was “inconsistent” with the Equal Credit Opportunity Act and Credit Card Accountability Responsibility and Disclosure Act of 2009. The ABA recommended that the CFPB account for the practical aspects of the credit process in finalizing the rule and distinguish between the types of income permitted on the application, as well as clarify income language on the application.
“Given the history and goals of the ECOA, the Congressional intent of the Credit Card Act, and the potential harm to qualified borrowers who happen to be stay-at-home spouses or partners, the bureau should proceed with its proposal to eliminate the requirement that 21 or older demonstrate an ‘independent’ ability to pay before they may obtain a credit card account,” the ABA said in the letter.