CFPB Reconsiders “Independent” Ability-to-Pay Provision

by Mercator Advisory Group 0

The Consumer Financial Protection Bureau Monday submitted an amended final rule for Regulation Z of the Truth in Lending Act for publication in the Federal Register. Regulation Z currently requires that issuers consider a consumer’s independent ability to pay before granting or increasing access to credit.

Since the regulation was first published in 2009, consumers and industry experts have argued that it unfairly restricts stay-at-home spouses’ access to credit. These individuals often lack sources of income independent from their spouse.

“Stay-at-home spouses or partners who have access to resources that allow them to make payments on a credit card can now get their own cards,” said CFPB Director Richard Cordray. “Today’s final rule is an example of the Bureau’s commitment to working with consumers and financial institutions in order to ensure responsible access to credit for American families.”

Here are the highlights of the final rule:

• It removes references to an “independent” ability-to-pay standard for consumers 21 and older. Now, issuers only have to consider the individual’s ability to pay, which can reflect assets to which s/he has “reasonable” access.

• It maintains that consumers under the age of 21 without a cosigner must have an independent ability to pay.

• It affirms that the independent ability-to-pay standard for consumers under 21 does not violate the Regulation B prohibition against age-based discrimination.

Compliance is required within six months of the rule’s publication. Read the final rule here.

Click here to read more from the announcement.