The CARD Act went through a big brouhaha when it first came up a few years back. It passed anyway, in May 2009, and since then it has flown almost entirely unnoticed under the radar, economically undermining full-time parents the whole time. I'm going to say "mothers" here because the vast majority of full-time parents are still mothers, meaning the negative effects of this act fall disproportionately on women. (See http://www.census.gov/... and similar sites for more info about the percentage of fathers who are full-time parents.)
I'll apologize in advance because my "Link" button doesn't work properly. I have to list links manually as text. I think it has to do with my bristling antivirus defenses.
What's the CARD Act? Its original intentions were good: To prevent credit card companies from hawking cards to young people unable to pay debts and to protect consumers in various ways. In 2010, the Consumer Financial Protection Bureau studied the results of the CARD Act to see what had happened on the ground. Here's what they found.
These studies demonstrated that one year after the effective date of many provisions of the CARD Act, industry practices have changed in four significant ways.
The long-standing practice of hiking interest rates on existing cardholder accounts has been dramatically curtailed.
The amount of late fees consumers are paying has been substantially reduced.
Overlimit fees have virtually disappeared in the credit card industry.
Consumers report that their credit card costs are clearer, but significant confusion remains.
Great! This is all good news so far. One of the primary purposes of the CARD Act was to keep students from getting into debt they couldn't pay.
1. Here's a quote from a story from the April 30, 2012 Gaston Gazette in North Carolina, titled "Study: CARD Act doesn't keep kids out of credit trouble."
Jim Hawkins, a University of Houston Law Center professor, surveyed more than 500 college students and looked at 300 agreements between credit card issuers and colleges over the past two years.
“Based on this survey and study, I found that many of the CARD Act’s student and young consumer provisions have not affected credit markets in the ways the Act’s proponents had hoped,” Hawkins said.
Among his findings:
- 27 percent of students younger than 21 listed loans as part of their income
- 68 percent of students younger than 21 reported receiving credit card offers in the mail, a practice the CARD Act’s sponsors said they hoped to curtail.
- 40 percent of students said they saw credit card companies giving gifts to students after the CARD Act went into effect. It was supposed to end aggressive marketing to college students.
- A requirement that credit card companies disclose previously secret agreements between issuers and colleges has caused virtually no change in the number of agreements.
- In a possible sign the CARD Act is beginning to work, the number of students who reported getting credit card offers in the mail decreased between 2010 and 2011.
Obviously, the CARD Act didn't have the desired effect on students getting cards and borrowing them. But really, what else could go wrong, right? But then there's this story from
U.S. News & World Report Money section:
2. The War on Women: Why Stay-at-Home Moms Need Permission to Get Credit (http://money.usnews.com/...). The whole article is solid, but there are two money quotes. Here's the first:
Last year, the Federal Reserve declared that credit card applicants must use their individual income on the application, not their household’s. This seemingly innocuous pronouncement has resounding implications: homemakers cannot get a credit card without the breadwinners’ permission.
Woops. Did the CARD Act really intend to do that? I'll bet it was an accidental result. Right? Here's the other money quote:
As a remedy, the legislation required those under 21 to either list their own income — which, for most students, is too small to get a credit card — or enlist a co-signer, who is legally responsible for the debt.
All of this is innocuous enough. But in March 2011, the Federal Reserve declared that the provision would apply to all people, be they dependents or equal partners in a household. No paycheck, said the Fed, no credit card. The implication was clear: A homemaker does not contribute to her partner’s income.
So no, the provision for full-time mothers to be denied credit without her partner's permission was not an accident. It was deliberate. The article goes on to say:
As a result of the CARD Act, a stay-at-home parent must ask for her partner’s permission to get a credit card. A homemaker may make most of the household’s financial decisions, from paying the bills to buying groceries. But she — and by a 30 to 1 margin, it’s a she — is barred from taking out a line of credit based on income that, it cannot be doubted, she had a hand in earning.
Anyone here familiar with "coverture"? It's the ancient system of laws from England based on the idea that when a woman married, her legal identity (and all other identities) subsumed into that of her husband. Under coverture, the system of laws that developed mandated -- among other things -- that all earnings of the household belonged to the husband.
In the early days of taxation in the U.S., decisions had to be made about what had economic value and how to tax it. There was a movement to award women's work value and women's earnings to women, overturning coverture, and as a result, the decision was made that if women's work could not be awarded to husbands, then it wouldn't be counted at all. This massive theft has remained enshrined in the United States ever since. (To read more about this, try, for example, The Price of Motherhood by Ann Crittenden. There's plenty of documentation out there.)
More from the UNWR article:
...the homemaker’s contribution to the household income is entirely ignored. If she were taken out of the equation, her partner would have to work harder to earn the same amount of money. And yet, because her impact isn’t listed in a form that the IRS would recognize, her partner claims her labors as well as his own.
[Emphasis mine.]
Coverture.
This hasn't gone down totally without a fight, though. Reps. Louise Slaughter (D-NY) and Carolyn Maloney (D-NY) began to work soon after passage for a change in this bill to bring back mothers' rights to individual credit (http://maloney.house.gov/...).
They said, among other things:
"The CARD Act has two provisions regarding 'ability to pay': one directed at those under 21, which requires issuers to asses an applicant’s 'independent' ability to pay (so they cannot use their parents’ income to qualify) and another which requires issuers to assess an applicant’s ability to pay and does not specify that it has to be independent income. I believe the Federal Reserve has conflated the two in their proposed rule, and erred in requiring that all applicants provide independent income information," Maloney said.
“When we passed the landmark Credit Cardholder’s Bill of Rights, it was fundamentally about fairness to the average consumer,” said Slaughter. “While I was proud that my
amendment to protect young adults was included in the legislation, we should remember that it was necessary because college students were targeted by credit card companies and too often falling into crippling debt. That provision should not be extended in a way that harms stay-at-home mothers. I urge the Fed to keep that in mind as they move forward."
Holly McCall of MomsRising has also started a petition to reverse this provision targeting mostly stay-at-home mothers, but also stay-at-home fathers. Here's the link to the petition:
http://action.momsrising.org/...
And here's Holly's story of applying for credit and being denied: http://www.momsrising.org/...
For a depressing kickback, read the comments to Holly's blog entry. Some good points about going into debt, and yet, our point still remains: Mothers and fathers who stay at home full-time are making a real economic contribution. In spite of that contribution, they already pay in terms of future employment prospects, future pay, lack of Social Security and health insurance and retirement, respect, promotions, etc. There is no reason to further punish and marginalize full-time parents for the duration of their time at home raising children. They are already paying a stiff price that can never be undone -- in spite of their hard work and contribution.
Please help us roll back this provision of the CARD Act.
Full text of the CARD Act: http://www.govtrack.us/...
Link to the petition to change the CARD Act: http://action.momsrising.org/...