Alert April 30, 2013

CFPB Finalizes Amendments to CARD Act Rule

The CFPB finalized its rule amending Regulation Z, which implements a provision in the Credit Card Accountability Responsibility and Disclosure Act of 2009 that requires credit card issuers to evaluate a consumer’s ability to make payments based on his or her independent income or assets prior to opening an account. The changes are in response to findings that a significant number of otherwise creditworthy individuals may have been denied access to credit cards because their income is dependent upon their spouse or partner (see November 13, 2012 Alert). The rule removes references to an "independent" ability to pay from the relevant provisions and permit accessible income to be included in the evaluation of a consumer’s ability to pay, provided that the consumer has a reasonable expectation of access to the funds. Card issuers, however, must still consider the independent ability-to-pay standard for consumers under the age of 21 without a cosigner or similar party who is 21 years or older. The rule clarifies in the commentary the circumstances in which the expectation of access is deemed reasonable or unreasonable. For example, proceeds from student loans may be considered as current or reasonably expected income, but only to the extent those proceeds exceed the amount disbursed or owed for tuition and other expenses. Finally, the final rule clarifies that the independent ability-to-pay standard for consumers under 21 does not violate Regulation B’s prohibition against age-based discrimination.