On April 29, 2013 the Consumer Financial Protection Bureau published an 86-page final rule to amend Regulation Z.  The final rule has four main elements:

  • First, the final rule generally removes references to an independent ability-to-pay standard from Section 1026.51(a)(1) and associated commentary. As a result, card issuers are no longer required to consider whether consumers age 21 or older have an independent ability to pay; instead, card issuers are now required by Regulation Z to consider the consumers ability to pay.
  • Second, in determining a consumers ability to pay, the final rule permits issuers to consider income or assets to which an applicant or accountholder who is 21 or older  and thus subject to Section 1026.51(a) rather than Section 1026.51(b)  has a reasonable expectation of access. The final rule clarifies by examples in the commentary those circumstances in which the expectation of access is deemed to be reasonable or unreasonable.
  • Third, the final rule continues to require in Section 1026.51(b)(1)(i) that consumers under the age of 21 without a cosigner or similar party who is 21 years or older have an independent ability to pay, consistent with TILA section 127(c)(8).
  • Finally, the final rule clarifies that application of the independent ability-to-pay standard to consumers under 21, consistent with Regulation Z, does not violate the Regulation B prohibition against age-based discrimination.

Many of our readers do not issue credit card accounts and therefore are not affected by the final rule. For those readers that are impacted, underwriting rules should be reviewed and revised as needed.
The rule was effective on May 3, 2013. Compliance with the rule is required by November 4, 2013. Card issuers may, at their option, comply with the final rule prior to this date.
A copy of the final rule is available here.