Congresswoman Shelley Moore Capito, R-W.Va., Chairman of the Subcommittee on Financial Institutions and Consumer Credit, delivered the following opening remarks at today's Financial Institutions and Consumer Credithearing entitled "An Examination of the Federal Reserve's Final Rule on the CARD Act's "Ability to Repay' Requirement.'"
Remarks as prepared for delivery:
This hearing will come to order. We expect this afternoon's hearing to be interrupted by another series of votes. I would ask our witnesses to be patient as we try to get through this hearing as quickly as possible.
In March 2011, the Federal Reserve Board finalized an "ability-to-pay" rule after Congress delegated rulemaking regarding changes to the Truth in Lending Act as part of the Credit Card Accountability Responsibility Act of 2009. The Federal Reserve determined that when considering a consumer's ability-to-pay card issuers must consider the consumer's independent ability-to-pay.
I, along with many of my colleagues on the Financial Institutions and Consumer Credit Subcommittee, have significant concerns that the Federal Reserve Board's interpretation of the CARD Act could result in stay-at-home spouses being denied access to credit or having their access to credit severely diminished. In fact, the Federal Reserve Board acknowledged that even if a consumer has access to the income or assets of a spouse they could still be denied access to credit.
This certainly was not the intention of the CARD Act. It is clear that the intent of Congress was to provide extra protections for borrowers below the age of 21. Unfortunately, the Federal Reserve Board chose to go well beyond the intent of Congress and apply the requirement of an independent income to all consumers.
We've heard significant concerns from many fronts on this issue. Many parties warned the Federal Reserve that this would be the result of forcing issuers to consider a consumer's independent income. Consumers are now seeing the real effects of this regulation.
This rule could be especially punitive for women who are in a failing marriage or abusive relationship. One of the fundamental steps necessary to escape from one of these unfortunate situations is establishing and maintaining credit history. Financial independence is absolutely necessary to begin to build a new life. Similarly, stay-at-home spouses whose husband or wife dies unexpectedly could face similar challenges if they've not maintained a credit history.
Later this afternoon I will ask for unanimous consent to insert into the record a statement from USAA in which they raise concerns about the adverse effect this rule will have on military families. According to their statement, nearly fifty percent of military wives do not work. Many of these families are already strained by the rigors of military service. The ability-to-pay rule threatens to further complicate the situation by potentially limiting their access to credit.
Although the Federal Reserve drafted this flawed rule, the responsibility for enforcement now resides the Consumer Financial Protection Bureau. Mr. Cordray has indicated a willingness to provide greater clarity on this issue within the next 30 days. I strongly urge him to take action in order to avoid further unintended consequences. If legislative action is necessary, we stand ready to act.
I look forward to hearing from our two panels today. I hope Ms. Hillenbrand will be able to provide an update on the CFPB's intentions to rectify the Federal Reserve's flawed rule. Our second panel witnesses will be able to provide members of the subcommittee with a better sense of how this rule is potentially limiting access to credit for consumers.
I now would like to recognize the Ranking Minority Member, the Gentlelady from New York, Mrs. Maloney for the purpose of making an opening statement.