Before the Obama administration pushed the creation of Consumer Financial Protection Bureau through Congress, one of its finest accomplishments on the the consumer protection front was the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 -- aka, the CARD Act -- which will save credit-card holders hundreds of millions of dollars and almost as many headaches.
But while the CARD Act improved conditions for many consumers, it also inadvertently made life a little more difficult for some of them -- specifically, the roughly 5 million stay-at-home parents in America, who suddenly had a harder time getting credit cards.
It looks like that's about to change.
The Gain and the Pain
There's a lot to admire about the CARD Act:
It banned retroactive interest rate increases on credit cards.
It ended many fee traps, such as cardholders not being given much time in which to pay their bill, or due-date deadlines falling in the middle of the day.
It restricted subprime lending fees, which had soared to very steep levels.
It required credit card documents to be written in plain language, and that contracts be easier to find and access.
It upped the penalties that lenders who break the rules will pay.
The downside, though, is that the new law also stated that when credit card issuers were considering an application, they could no longer consider the household income of the applicant, but instead had to consider only that applicant's individual income.
A seemingly good result of the change was that college students or young adults with little to no income wouldn't easily be able to obtain credit cards and rack up crippling debt, as many had done under the then-existing laws. But the shift also zinged stay-at-home spouses, who reasonably expected that total household income would count in their favor.
This highlights an interesting issue -- the economic value provided by stay-at-home spouses. In a sense, credit card issuers are reasonable in seeing a stay-at-home spouse as generating little or no income that could be applied toward paying off credit card debt. But it's also wrong to think of these folks as not delivering any economic value.
Considering the Shadow Salary
Salary.com recently calculated an estimate of that value, finding that the typical stay-at-home mom works about 95 hours per week, delivering about $113,000 in value. In other words, it would cost about that much to replace her. The site added, "For working moms, the extra 57.9 hours a week of work they put in is worth $66,979." (Reflecting our recent difficult economic environment, the $113,000 sum is down from $138,000 in 2007.)
If you think the $113,000 figure is high, the folks at Insure.com came up with their own total of roughly $60,000. The difference might lie in the comprehensiveness of each group's assessment. At Salary.com, they considered activities such as operating laundry machines for several hours per week, as well as performing duties that might otherwise be done by a psychologist, janitor, van driver, facilities manager, cook, housekeeper, day care teacher, and so on.
Giving Stay-at-Home Parents Credit
CFPB Director Richard Cordray has acknowledged the issue: "We have determined that it is a significant problem," adding that "tens if not hundreds of thousands" of Americans have been denied access to credit as a result of the rule.
A fix was urged by many members of Congress as well as by more than 40,000 people signing an online petition at Change.org. The petition was started by Holly McCall of Vienna, Va., who explained, "It is 2012, and because I'm a stay at home mom, I can't get my own credit card. My husband has to give me permission to get my own line of credit. This is demeaning and flat out unfair."
The CFPB agrees, and plans to revise the rule. A draft proposal from the Bureau is expected later this year.
The Big Picture
These days it's become rather vital to have a strong credit history and rating. Not only are credit (and debit) cards extremely useful in our lives as consumers, our credit scores are often checked when we apply for jobs, attempt to rent property, and of course, borrow money.
It's true that many of these people could rely on their spouses' credit for many things, but not all marriages last, and if a spouse has to strike out on her own for whatever reason, she needs credit in her own name.