The Federal Reserve has recently proposed new rules in credit card lending to only consider one’s personal income and not the household’s income.
Essentially, this sounds smart. They are trying to prohibit those without a steady income from taking on credit, especially those unable to repay their debt. However, Margaret Ryznar points out an outstanding point in her most recent review of this proposal: what about stay at home mothers and fathers? This large group of people do not bring in a steady income, instead they run their household and tend to their families. Since this does not bring in a paycheck, under the new rules, they would not be granted credit.
While the Federal Reserve’s proposed rules do not necessarily reflect any particular or reasoned assault on stay-at-home mothers, they do indicate the vulnerability of certain members of the family in a new era of credit-tightening and budget-cutting. – Source
Ryznar explains how the underlying catalyst of this new proposal was a direct result of the 2008 recession. The recession showed us that too much credit existed and the Federal Reserve is making an effort to cut back with a tightening of credit.
This new rule follows a series of rules and acts already put into place since the recession. In 2009, President Obama signed The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act into law which amended the Truth in Lending Act (TILA). While this new rule would prohibit those unable to successfully pay back their debt this is a real damper on household’s who rely on one spouse to bring home a paycheck.
Given the frequent treatment of the family as a single economic unit, as well as the increased sensitivity to women’s issues, it is difficult to justify barring married non-income earners from the credit card market. – Source
Ryznar expresses concerns with the new proposal in how it will parallel the “historical exclusion of women’s participation in economic affairs, which has been long ago rejected in American society and law”. Ryznar encourages immediate attention to the proposed rules especially since it may pose “equal protection concerns”.
While I do think the new rules provide a benefit for those who are getting into debt and unable to pay it back I do see a high risk in this new rule in how it might affect non-income earning spouses. Credit, as we all know, is needed in this world. Everyone needs a stable credit report in order to move forward in life and get better rates for things, such as mortgages. With this new rule implementation it might make it harder for couples to get a decent mortgage since only the income-earning spouse would potentially have a solid credit report.
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