Friday, July 15, 2011

Back To The Fifties? Credit Cards And Stay-At-Home Parents

You probably did not pay much attention to the Credit Card Act of 2009. In any case, it was full of goodies for the consumers, including stricter regulations about when companies can market credit cards to people under 21 years of age. The basic requirement is that the applicant must be able to pay back the money owed or must have a cosigner capable of doing so.

But the Federal Reserve recently expanded this rule to people over 21 years of age. This is very bad news for stay-at-home parents, most of whom are women. From last March:
The U.S. Federal Reserve approved a rule that would require credit-card issuers to consider consumers’ individual incomes before extending credit.
Credit-card applications generally can’t request “household income” because that term is too vague for issuers to evaluate whether customers will be able to make the required payments on the accounts, according to a statement from the Fed today. The rule is needed to prevent making credit available to consumers who lack the ability to pay, the Fed said.
The change is supposed to limit issuers from giving cards to college students, yet some lawmakers have been concerned that stay-at-home spouses will suffer.
“The proposed regulations ignore their demonstrated credit-worthiness because of their lack of current market income,” Representative Carolyn Maloney, a New York Democrat who sponsored the credit-card bill and Representative Louise Slaughter, a New York Democrat, said in a letter to the Fed in January.
Card issuers can allow spouses to apply jointly for credit, the Fed said.

Or in simpler terms:
Earlier this year, the Fed ruled that credit card applications should ask about a consumer’s individual income or salary rather than his or her “household income.” This isn’t just for students under 21, but for everyone. That means that a stay-at-home parent is considered as unworthy of credit as an unemployed college kid–and seven out of eight stay-at-home parents are mothers. No one without a pay stub, no matter the value of her contribution to her household, can get a line of credit unless her spouse cosigns the account.
In response to criticism from women’s rights advocates who believe that access to credit is a key tenet of financial independence, the Federal Reserve noted that the individual-income provision may be “inconvenient or impractical,” but that such restrictions are necessary to prevent reckless lending and borrowing.
Or in even simpler terms: A stay-at-home spouse must ask the breadwinner spouse's permission to get a credit card, but that same breadwinner spouse does not need the stay-at-home spouse's permission! Financial inequality will be neatly built into these relationships. It really is back to the fifties, my sweet readers.

And what happens if the breadwinner spouse refuses?

The underlying thinking is obvious: The money the breadwinner earns is just his (or her) money, not the family's money! And the stay-at-home partner is worth nothing.

And this is just inconvenient or impractical?

I guess one might argue that every person should carefully consider this before becoming a stay-at-home parent.