In a bi-partisan letter to the Consumer Financial Protection Bureau, House Financial Services Committee Chair Spencer Bachus (R-Ala) and senior committee members asked the Bureau to study and report back on the impact of the ability to pay rules implemented by the Federal Reserve before the CFPB took over implementation of the Credit CARD Act. The rules, amending Regulation Z, took effect October 1, 2011 and required all consumers to demonstrate an independent ability to pay rather than the dual standard for college-age consumers and all others called for in the legislation. The House leaders requested the CFPB to conduct an extensive review of the potential impact that these new rules are having on the ability of consumers to obtain credit and amend Regulation Z if it finds a negative impact. They urged the Bureau to begin this process before the end of the year. The letter was also signed by, among others, Committee Ranking Member Barney Frank (D-MA) and Rep. Carolyn Maloney (D-NY), an author of the Credit CARD Act.
The Federal Reserve’s final rules create a uniform standard requiring all consumers to demonstrate an independent ability to repay. The Members believe that these rules contradict the Congressional intent of the Credit CARD Act since the Act created two distinct standards, one for younger consumers and one for all others. They also are concerned that these rules will disadvantage stay-at-home spouses who may not have an independent source of income but whom may have ample household income to secure lines of credit.
Members wrote to the Federal Reserve on May 6, 2011 requesting that the Fed, in consultation with the CFPB, undertake a study to look at the effects of applying a uniform standard on all consumers in the first six months after the implementation with a report back to Congress. They further requested that if it is found that stay-at-home spouses have been negatively impacted, the Board or the CFPB should then amend the rule to correct any problems it has found.
In its June 15th response to the House request, the Federal Reserve agreed that a study would be useful to assess unintended consequences of the rules. The Fed noted that the Bureau has the authority to design and conduct a study to inform potential future rulemaking. The Federal Reserve also said it was ready to consult with the Bureau in order to share their experience and expertise in this area.
The House Members noted that the CFPB has a unique perspective and can look across the credit card issuing industry to determine any potential negative impact. Through its consumer complaint line, the CFPB can also learn first-hand from those directly affected.