House Hearing Will Scrutinize CARD Act’s Ability to Repay Provision
The House Financial Services Subcommittee on Financial Institutions and Consumer Credit planned a hearing Wednesday on the Federal Reserve’s final rule on the CARD Act’s Ability to Repay Requirement.
The rule, which took effect Oct. 1, 2011, excludes household income when determining a credit card applicant’s ability to repay credit card debt. Opponents argue the rule is unfair to non-working spouses.
“First, and fundamentally, the independent income standard fails to recognize that family households are typically joint economic enterprises,” witness Oliver Ireland said in his testimony, released in advance of the hearing. The attorney who specializes in financial services issues worked for the Federal Reserve Board for 26 years.
Ireland said he was involved in the crafting of the Equal Opportunity Credit Act of 1974, and called the ability to pay rule a “step backward for human dignity and social equality”, and said card issuers use sophisticated credit risk evaluation models to effectively measure risk and make credit decisions.
Ashley Boyd, campaign director for grassroots organization MomsRising, the group that organized a petition drive last month that prompted the Consumer Financial Protection Bureau to reconsider the rule, also was scheduled to testify at the hearing.
“Rejecting household income as a basis for credit card qualification sends an insulting message that stay-at-home parents have no economic value,” Boyd said in her released testimony. “In reality, they contribute as much to their household’s credit rating as the family breadwinner, because in most cases, they are responsible for managing the family’s budget.”
Boyd said she believes stay-at-home parents should be exempt from the provision, if data shows the interpretation of the rule is unfairly limiting credit opportunities.
In a letter to subcommittee Chairman Shelley Moore Capito (R-W.Va.) and Ranking Member Carolyn Maloney (D-N.Y.), NAFCU President/CEO Fred Becker called the provision “shortsighted” and said it “will undoubtedly have a negative impact on credit unions and their 94 million members.”
“In all likelihood, it will have an especially disproportionate impact on women and spouses that do not work outside of the home,” he said.
The hearing is scheduled to begin at 2 p.m. in Rayburn House Office Building. CFPB Associate Director Gail Hillebrand also was scheduled to testify.
Also Wednesday, the Senate Banking Committee planned to conduct a hearing titled “Implementing Wall Street Reform: Enhancing Bank Supervision and Reducing Systemic Risk.”
Witnesses scheduled for the 10 a.m. session in the Dirksen Senate Office Building included Acting FDIC Chairman Martin Gruenberg and CFPB Director Richard Cordray. The hearing was set to be broadcast online through C-SPAN.