Banking group head advocates for better credit card rules

In the last few weeks, a rule from the federal government that stands as a barrier between credit cards and some otherwise qualified consumers who may want them has come under fire, and now the head of an influential bankers' group has added his voice to the cause.

Frank Keating, the president and chief executive officer of the American Bankers Association, recently came out in opposition to a rule that prevents many stay-at-home parents from being able to get a credit card in their own name, according to an editorial he wrote for the Huffington Post. The rule, which was designed to protect younger consumers and those with little income of their own from taking on costly credit card accounts, was introduced as part of the Credit Card Accountability, Responsibility and Disclosure Act of 2009.

But while it was well-intentioned, it has also had the unintended effect of preventing stay-at-home parents, who rely on their spouse or partner's income, from obtaining their own cards, the report said. This is because the rule does not allow lenders to consider a household income on an application, only their personal income. This can be problematic for stay-at-home parents for many reasons, in particular if their spouse or partner passes away, or if there is a divorce or separation, it may be difficult for the applicant to obtain a line of credit of their own because they may have a limited borrowing history in the last several years.

For this reason, it can be important to change the rules so that stay-at-home parents can obtain credit cards if they need them, Keating wrote. And further, the rule is at odds with those for consumers under the age of 21 who may seek a credit card because regulations only specify that the younger demographic have "the ability to repay" any debts they may rack up, without adding the "independent" means to do so.

So what could be the alternative?
Keating notes that it might be helpful for there to be a different means of qualification for these stay-at-home parents, based not on their personal income, of which they would have little to none and therefore not be able to get the card, the report said. Instead, it could be helpful for lenders to use their previous borrowing habits as a means of determining their eligibility for a card, when they have no income of their own. This could be helpful because it would allow those who have a limited borrowing history, such as young adults just starting out in dealing with credit, to be judged based on their personal income, while allowing the qualifications of older borrowers who don't have an income to be weighed based on past habits.

Consumers who are applying for any type of credit card may want to consider ordering copies of their credit reports. This will help them determine whether any unfair markings are unduly lowering their credit ratings.