Personal Finance and Money Management

Stay-at-home moms will be an unintended target, if one of the recent proposals by the Federal Reserve goes into affect. Merchants and retailers are not happy with the proposed law either as it would require credit card issuers to consider only the income of the actual borrower and not consider other household income. The new rule would apply to new credit card accounts and requests for credit limit increases on existing accounts.

According to David Jaffe, president and CEO of Dress Barn, a specialty store for women and young girls, the proposed rule “would unfairly restrict the ability of many consumers, particularly women not working outside the home, to qualify for credit.” Under the proposed rule, if a customer with no income requested credit on the spot, he or she wouldn’t qualify for it unless a higher-earning spouse applied jointly for the account.

The suggested measure is “intended to enhance protections for consumers and to resolve areas of uncertainty so that card issuers fully understand their compliance obligations,” according to the Fed proposal. But Dress Barn, Home Depot Inc., Citigroup, Limited Stores LLC and other companies are urging the Fed to reconsider the proposal. Store-branded and retail credit cards that offer discounts and other perks, a valuable marketing tool for many merchants, would be negatively impacted when qualifying for a line of credit is dependent on the income earner’s availability to apply in person.

Women’ right groups have questioned the logic behind the proposals that will have a major impact on their purchasing power. Representing banks and retailers on consumer finance issues, Anne Fortney, a lawyer at Hudson Cook LLP in Washington, said, “It is astonishing that people have forgotten how difficult it was 40 years ago, particularly for women, to establish credit. This would really take a lot of women back to where they were in the early 1970s.”

Last year, retailers opposed an attempt by the Feds to require more financial information from customers applying for credit. In essence, customers would have had to provide paystubs and tax records when applying for a card at the register. But retailers say store-branded cards are less risky to borrowers and therefore do not require such scrutiny. The Feds conceded and now allow for a reasonable estimate of income.

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Tags: Moms, Moms Affected