CFPB Proposed Amendments to Reg. Z Ability-to-Pay Requirements

by Morrison & Foerster LLP
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On October 17, 2012, the Consumer Financial Protection Bureau (“CFPB”) issued a proposed rule (“Proposed Rule”) to amend the Truth in Lending Act’s (“TILA”) ability-to-pay requirements, as added by the Credit Card Accountability Responsibility and Disclosure Act of 2009 (“CARD Act”) and implemented by Regulation Z. The requirement has been the topic of frequent criticisms from lawmakers, the industry and consumer groups as preventing non-working spouses from obtaining credit. Echoing previous statements from his Congressional testimony, the CFPB’s press release quotes Director Cordray as saying “[w]hen stay-at-home spouses or partners have the ability to make payments on a credit card, they should be able to obtain a card in their own name,” and “[t]oday the CFPB is proposing common-sense changes that would facilitate credit access for spouses or partners who do not work outside the home.”

In the Proposed Rule, the CFPB states that it “believes that § 1026.51(a), as currently in effect, may unduly limit the ability of certain individuals who are 21 or older to obtain credit and is proposing amendments to Regulation Z that it believes are more consistent with the plain language and intent of the [CARD] Act.” Accordingly, the Proposed Rule would remove the word “independent” from the ability-to-pay requirement for consumers who are 21 and older, and would permit issuers to consider income to which consumers have a reasonable expectation of access. The CFPB also proposes to make technical amendments to Section 1026.51(b) of Regulation Z, which addresses requirements for consumers who are under the age of 21, as well as each section’s corresponding Commentary. Comments will be due 60 days after publication of the Proposed Rule in the Federal Register.

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