Today the Consumer Financial Protection Bureau (CFPB) announced that it is proposing to amend Regulation Z, which implements the Truth in Lending Act (TILA), and the official interpretation to the regulation, which interprets the requirements of Regulation Z. Regulation Z generally prohibits a card issuer from opening a credit card account for a consumer, or increasing the credit limit applicable to a credit card account, unless the card issuer considers the consumers ability to make the required payments under the terms of such account.
Regulation Z currently requires that issuers consider the consumers independent ability to pay, regardless of the consumers age; in contrast, TILA expressly requires consideration of an independent ability to pay only for applicants who are under the age of 21. The CFPB requests comment on proposed amendments that would remove the independent ability-to-pay requirement for consumers who are 21 and older, and permit issuers to consider income to which such consumers have a reasonable expectation of access.
For example, assume that an applicant is not employed but shares a household with another individual (the household member) who is employed. If the household members salary is deposited into a joint account shared with the applicant, a card issuer may consider that salary to be the applicant’s income for purposes of the proposed rule.
The proposal only impacts credit card accounts. Once finalized, underwriting procedures for credit card accounts may need to be modified to accommodate the additional flexibility provided by the proposal.
A copy of the 37-page proposal is available here.