Tag Archives: Credit Card Act of 2009

Why Every Stay-At-Home Mom Should Own A Business, Any Business

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If all of this year’s financial news from the Fed, congress and White House
seems too big and uncontrollable for a lot of us, here’s something that hits a
little closer to home.  New financial regulations
of the CARD Act of 2009, Regulation Z, will go into place in October 2011, and
one of them prohibits financial institutions from giving credit cards to people
who do not have documented individual sources of income.  Although it
was originally proposed to ensure students weren’t saddled with consumer debt
through aggressive marketing, the wording was expanded to include any individual without documented
income.  Sounds like a good idea,
right?  Not so fast.  The fallout is that non-employed spouses will
no longer be able to use their household income to qualify for
credit.   

Who cares?  Stay-at-home moms and mister-moms
should.  The National
Retail Federation said the rule “undermines more than a generation of
progress” since passage of the Equal Credit Opportunity Act. Because of
this rule alone, a woman should consider starting up her own business,
whether it is a primary or side pursuit.

 

There are many reasons to own a business in this country,
including tax advantages, continued professional development, schedule flexibility,
and income potential.  This new rule is one more reason for a mom to
have a business, even a teeny-tiny one, that documents profitable income. The
rule does not specify a minimum required income, but not having any documented
income is a show stopper when it comes to securing credit.  For all types of small businesses, including
home-party consultants, part-time blogger moms, retail store owners,
professional consultants, and more, a Schedule C or corporate tax return is the
documentation the credit issuers require.

 

“We’re not sure at all how this is going to work in
practice,” NRF Senior Vice President and General Counsel Mallory
Duncan said. “Since most stay-at-home spouses are women, this could put
women back more than 20 years in terms of their access to credit.” 

 

I was married and divorced nearly twenty years ago, I went
through a rocky time personally that nearly ruined my credit. I believe
that this provision takes us back even further than twenty years.  We
forget that stay-at-home spouses have economic value in our society, even
though they don’t receive a paycheck.  A non-employed spouse should have
access to credit throughout their marriage so they don’t incur financial
hardship should death, illness, abuse or divorce markedly change their
status after years, sometimes decades, of partnership.  Family tragedies
are difficult enough without removing access to credit, an undeniable necessity
of modern life in America. 
Even those who live debt-free have a credit score.  Having a favorable credit history is as
important as having a job.  Credit doesn’t just mean credit cards, but is
required for basic social functions such as the ability to rent property, buy a
car, or establish phone service.  

 

Many women make major changes to their employment status
when they are pregnant or shortly after having a baby.  Many educated and
talented women step off a professional cliff when they start a family,
potentially creating unintended financial consequences for themselves and their
families.  But starting a family can also be a great time to start
something new professionally.  A business
that a mom runs during naptime or school hours can be rewarding and more economically
beneficial than just a positive profit and loss statement. A business also can
be a woman’s ticket to financial independence. 
With her own income, she no longer depends on her spouse to include her
on a credit account. 

 

Moms put others first in so many ways, but when staying
at home to raise children means you give up your own financial identity,
that’s just wrong.  

 

Since last March when this rule was finalized, there appears
to have been little progress on correcting this language to mitigate the impact
on families and women.  The best thing we
can do is be aware of our options, and owning a business is certainly one of
them. Add this new law to the list of reasons for a woman to have and maintain
a business before, during, and after baby. 

 

 

 

More sources:

http://www.federalreserve.gov/newsevents/press/bcreg/20110318b.htm    

http://www.creditcards.com/credit-card-news/stay-at-home-parent-credit-cards-household-income-1282.php

http://www.nrf.com/modules.php?name=Newsletter&op=viewlive&sp_id=324&id=51

 

Originally published in Kalamazoo Parent magazine, October 2011

Stay At Home Parents Can Kiss Their Credit Goodbye with No Paycheck

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After an article I wrote appeared in Kalamazoo Parents magazine, a stay-at-home dad contacted me because he was mad mad mad about the recent changes curtailing financial rights of non-employed parents.  Did the fed regulations on the CARD ACT of 2009 really update in October 2011 to say that stay-at-home parents without income really have no access to credit?  Here’s what I found.

The information is buried pretty well, but the original reference is here: http://www.federalreserve.gov/newsevents/press/bcreg/20101019a.htm . One of the major provisions of the CARD Act of 2009 was to limit the marketing and credit that could be targeted to college students, who are largely without income.  However, the clarified language expanded the
provision to be of concern to anyone without their own independent income or assets.  See the third bullet in the Fed’s press release:

When evaluating a consumer’s ability to make the required payments
before opening a new credit card account or increasing the credit limit on an
existing account, card issuers must consider information regarding the
consumer’s independent income, rather than his or her household income.

 If you really want to read into it, check out the HRML or PDF link at the bottom of this press release, right about in the middle, where it states:

“The Board generally intended Sec.  226.51 to establish consistent standards for evaluating a consumer’s ability to pay. Specifically, Sec.  226.51 requires that card issuers establish and maintain reasonable written policies and procedures to consider the income or assets and the current obligations of all consumers, regardless of age.

See Sec.  226.51(a)(1)(ii), (b)(1)(i), and (b)(2)(ii)(B). For all consumers, a card issuer must consider either the ratio of debt obligations to income, the ratio of debt obligations to assets, or the income the consumer will have after paying debt obligations. See id. Furthermore, regardless of a consumer’s age, (emphasis added) it would be unreasonable for
a card issuer not to review any information about a consumer’s income, assets, or current obligations, or to issue a credit card to a consumer who does not have any income or assets. See id. Some card issuers request on application forms that applicants simply provide their “income,” while other issuers request that applicants provide their “household income.” The Board understands that there has been some confusion as to whether information provided by a consumer in response to a request for household income can be used by a card issuer to satisfy the requirements of Sec.  226.51. In particular, the Board understands that there has been some uncertainty as to whether Sec.  226.51 established different standards for underage consumers and other consumers with respect to the consideration of household income or assets. There appear to be three sources of this confusion.

   
First, the Board understands that some of the uncertainty regarding household income results from the fact that, in the February 2010 Final Rule, the Board expressly concluded that the income of an underage consumer’s spouse could not be used to satisfy the requirements of Sec.  226.51(b) but did not state a similar conclusion with respect to the general rule in Sec.  226.51(a). See 75 FR 7723. However, the issue of spousal or other household income was not addressed in the context of Sec.  226.51(a) because it was not raised during the comment period.  Accordingly, the Board is addressing the issue in this rulemaking.” 

This rule was tacked onto the previously passed CARD Act after a comment period that expired January 3, 2011, and then the rule passed.  So this was a done deal.  You can
read for yourself the current language in the CARD Act.  You can clearly see that the language was expanded to say any consumer, not just those under 21.

By the way, there are a ton of books on the market, and mine is just one of them, encouraging moms to start and run a professional business from wherever they live.  Although it might feel a bit odd for dads to read these books, they’ve got many of the same issues.  If you are very fired up about this issue (and I hope you are!), let me encourage you to protect your turf with a business if you choose.  If not, that’s cool, too.  We have so many option these days to protect our families and our professional selves, that we really are blessed. 

Why Every Woman Should Own Her Own Business (Of Any Size)

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You have probably seen the news recently about new financial regulations from the Fed due to start in October.  http://www.federalreserve.gov/newsevents/press/bcreg/20110318b.htm    The new provisions of the Credit Card Act of 2009 that will go into place in October prohibits banks from giving credit cards to people who do not have individual sources of income, such as non-employed parents.  Non-working spouses will no longer be able to use their household income to qualify for credit.   

Who cares?  Non-employed spouses should.  For this reason alone, a woman  should consider starting up her own business, whether she already has a job and is hoping to take time out of the workforce to start a family or she stays at home. There are many reasons to own a business in this country, including tax advantages, continued professional development, flexibility, and income potential.  This new regulation is one more reason for a mom to have a business, even a teeny-tiny one, that documents profitable income. What some may not realize is that small businesses can be more alike than they are different, from the occasional Pampered Chef consultant to the very part-time blogger mom to the retail store owner and more.  Moms who are business owners have advantages over moms who are not.    

“We’re not sure at all how this is going to work in practice,” NRF Senior Vice President and General Counsel Mallory Duncan said. “Since most stay-at-home spouses are women, this could put women back more than 20 years in terms of their access to credit.”  http://www.nrf.com/modules.php?name=Newsletter&op=viewlive&sp_id=324&id=51
 
I was married and divorced nearly twenty years ago, I went through a rocky time personally that nearly ruined my credit. I believe that this provision takes us back even further than twenty years.  We forget that stay-at-home moms (and dads) have economic value in our society, even though they don’t receive a paycheck.  A non-working spouse should have access to credit throughout their marriage partnership so they don’t incur terrible hardship as a financial unknown should death, illness, or divorce markedly change their status after years, sometimes decades.  Family tragedies happen every day and are difficult enough without removing access to credit, an almost undeniable necessity of modern life in America.  Although I advocate for debt-free living, having a credit history is as important as having a job.  Credit doesn’t necessarily mean credit cards, but can impact basic life functions such as the ability to rent, buy a car, or even establish phone service.  
 
Many women make major changes to their employment situation when they are pregnant or shortly after having a baby.  Many professionally trained and talented women take a huge step off a professional cliff when they start a family, potentially creating unintended financial concerns for herself and her family.  A business that a mom runs during naptime and on weekends can not only rewarding and economically beneficial in more ways that you can count on just a profit and loss statement, but it now becomes a woman’s ticket to financial independence, without depending on her spouse to approve her inclusion on a credit account. 
 
Recent articles have advocated that non-employed spouses rush to apply for a credit card before the regulations go into effect, but the banks can already apply the new standards if they chose.  Older women with established credit histories may be less impacted.  I am more concerned for younger women.  I think the best thing we can do is learn to be aware of our options, and owning your own business is certainly one of them.
 
Moms put others first in so many ways, but when staying at home to raise children means you give up your own financial identity, that’s just wrong.  Way before this provision, I realized that I could never comfortably put my entire financial well being into another person’s hands again.  Add this new law to the list of reasons for a woman to have and maintain a business before, during, and after her baby.