Recent proposals from the Federal Reserve Board, intended to better protect consumers from the dangers of excessive credit card debt, may have the unintended result of making it more difficult or even impossible for those without their own income to obtain a line of credit, according to a report from MarketWatch. The rule would, if passed, require lenders to consider a person's individual income, rather than that of their household, when determining whether they are creditworthy.
This rule would likely make it more difficult for people like stay-at-home parents to qualify for a line of credit, which could put them in a dire situation down the road, the report said. For example, if that person is faced with divorce or the death of the household's primary earner, lenders may disqualify them from accounts that allow them to take on credit card debt because they lack the proper individual borrowing history.
"We are concerned that the board’s proposal will hamper a stay-at-home mom's ability to establish her own independent credit history by applying independently for a card," a letter from New York Representatives Carolyn Maloney and Louise Slaughter said, according to the news source. "Many stay-at-home moms have a strong work history, yet the proposed regulations ignore their demonstrated credit-worthiness because of their lack of current market income."
However, the Federal Reserve believes that there are some instances in which this rule would not prevent those without their own income from obtaining accounts for credit card debt, the report said. For example, they may be able to apply jointly for an account with the household's primary earner, thereby maintaining a credit history in some way.
On the other hand, some experts warn that even in these cases, a person without their own income may still be able to qualify for accounts, but only those with sky-high interest rates. This would in turn make it more difficult for them to manage their credit card debt, the report said.
Lenders may also be more cautious about lending to those with spotty credit histories because they have a greater chance of defaulting, something that has plagued the entire industry in the past.