U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

76–104 PDF 2012

AN EXAMINATION OF THE FEDERAL RESERVE’S 

FINAL RULE ON THE CARD ACT’S 

‘‘ABILITY TO REPAY’’ REQUIREMENT 

HEARING 

BEFORE THE

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS 

AND CONSUMER CREDIT 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

JUNE 6, 2012 

Printed for the use of the Committee on Financial Services 

Serial No. 112–133 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

SPENCER BACHUS, Alabama, Chairman 

JEB HENSARLING, Texas, Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

NAN A. S. HAYWORTH, New York 

JAMES B. RENACCI, Ohio 

ROBERT HURT, Virginia 

ROBERT J. DOLD, Illinois 

DAVID SCHWEIKERT, Arizona 

MICHAEL G. GRIMM, New York 

FRANCISCO ‘‘QUICO’’ CANSECO, Texas 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

BARNEY FRANK, Massachusetts, Ranking 

Member 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

ANDRE ́ CARSON, Indiana 

JAMES A. HIMES, Connecticut 

GARY C. PETERS, Michigan 

JOHN C. CARNEY, JR., Delaware 

JAMES H. CLINGER, Staff Director and Chief Counsel 

(III) 

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER CREDIT

SHELLEY MOORE CAPITO, West Virginia, Chairman 

JAMES B. RENACCI, Ohio, Vice Chairman 

EDWARD R. ROYCE, California 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, North Carolina 

JEB HENSARLING, Texas 

PATRICK T. MCHENRY, North Carolina 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

FRANCISCO ‘‘QUICO’’ CANSECO, Texas 

MICHAEL G. GRIMM, New York 

STEPHEN LEE FINCHER, Tennessee 

CAROLYN B. MALONEY, New York, 

Ranking Member 

LUIS V. GUTIERREZ, Illinois 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

RUBE ́ N HINOJOSA, Texas 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

NYDIA M. VELA ́ ZQUEZ, New York 

GREGORY W. MEEKS, New York 

STEPHEN F. LYNCH, Massachusetts 

JOHN C. CARNEY, JR., Delaware 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

June 6, 2012 ...................................................................................................... 1 

Appendix: 

June 6, 2012 ...................................................................................................... 27 

WITNESSES 

WEDNESDAY, JUNE 6, 2012 

Boyd, Ashley, Campaign Director, MomsRising ................................................... 18 

Hillebrand, Gail, Associate Director, Consumer Education and Engagement, 

Consumer Financial Protection Bureau (CFPB) ............................................... 5 

Ireland, Oliver I., Partner, Morrison & Foerster LLP .......................................... 16 

Simme, Kirk, Senior Vice President, and Treasurer, Credit and Corporate 

Finance, Charming Shoppes, Inc., on behalf of the National Retail Federation ........................................................................................................................ 14

APPENDIX 

Prepared statements: 

Boyd, Ashley ..................................................................................................... 28 

Hillebrand, Gail ................................................................................................ 32 

Ireland, Oliver I. ............................................................................................... 36 

Simme, Kirk ...................................................................................................... 45 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Capito, Hon. Shelley Moore: 

Written statement of the Retail Industry Leaders Association (RILA) ....... 50 

Written statement of the Financial Services Roundtable ............................. 55 

Written statement of the U.S. Chamber of Commerce .................................. 59 

Written statement of the United Services Automobile Association 

(USAA) ........................................................................................................... 60 

Written statement of Women Impacting Public Policy (WIPP) .................... 64 

Maloney, Hon. Carolyn: 

Letter to Raj Date, dated December 6, 2011 .................................................. 65 

Letter to Jennifer J. Johnson, dated January 12, 2011 ................................ 68 

Letter to Hon. Barney Frank from Federal Reserve Chairman Ben 

Bernanke, dated April 27, 2011 ................................................................... 70 

Letter to Federal Reserve Chairman Ben Bernanke from Hon. Carolyn 

B. Maloney, Hon. Barney Frank, Hon. Louise M. Slaughter, and Hon. 

Mike Fitzpatrick, dated May 6, 2011 .......................................................... 72 

Written statement of Hon. Louise M. Slaughter ........................................... 73 

(1) 

AN EXAMINATION OF THE FEDERAL 

RESERVE’S FINAL RULE ON THE CARD ACT’S 

‘‘ABILITY TO REPAY’’ REQUIREMENT 

Wednesday, June 6, 2012 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS

AND CONSUMER CREDIT, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:20 p.m., in room 

2128, Rayburn House Office Building, Hon. Shelley Moore Capito 

[chairwoman of the subcommittee] presiding. 

Members present: Representatives Capito, Renacci, Pearce, 

Luetkemeyer; Maloney, McCarthy of New York, and Scott. 

Ex officio present: Representative Bachus. 

Chairwoman CAPITO. This hearing will come to order. We expect 

this afternoon’s hearing to be interrupted as it already has been, 

possibly by another series of votes. So I would ask our witnesses 

to try to be patient with us as we try to get through the hearing. 

Just some of the history of why we are here today, in March of 

2011, the Federal Reserve finalized an ability to pay rule after 

Congress delegated rulemaking changes regarding the Truth in 

Lending Act as part of the Credit CARD Act of 2009. The Federal 

Reserve determined that when considering a consumer’s ability to 

pay, card issuers must consider a consumer’s independent ability to 

pay. I, along with 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—and I think it already has; I think that is pretty evident— 

in stay-at-home spouses being denied access to credit or having 

their access to credit severely diminished. 

In fact, the Reserve acknowledged that even if a consumer had 

access to the income or assets of a spouse, they could still be denied 

access to credit and this is, in fact, happening. I don’t believe this 

was the intention of the CARD Act. It is clear that the intent of 

Congress was to provide extra protections for borrowers under the 

age of 21, to try to get at the issue of solicitations that credit card 

companies are doing of our young people, causing them to run up 

debt that they are unable to pay. 

Unfortunately, the Federal Reserve chose to go well beyond the 

intent of Congress and apply the requirement of an independent income to all consumers. We have heard significant concerns from 

many fronts. Some parties have warned that the result would be 

2 

forcing issuers to consider a consumer’s independent income, and 

consumers are seeing the real effects of this. 

This rule could be especially punitive for women who are in a 

failing marriage or an abusive relationship. As I think about what 

some of the fundamental steps somebody who is maybe in an unhappy marriage or an abusive relationship would take, one of the 

fundamental, I am sure, pieces of advice is to try to establish credit, try to establish a financial footprint. I think that is good common sense anyway, but particularly for those who are trying to get 

out of an uncomfortable situation. 

Financial independence is absolutely necessary to building a new 

life. Similarly, stay-at-home spouses whose husband or wife dies 

unexpectedly or divorces them could face similar challenges if they 

have not maintained a credit history. 

Later this afternoon, I will ask for unanimous consent to insert 

into the record a statement from USAA, which is quite extensive 

and very instructive, in which they raise concerns about the adverse effect this rule could have on military families. According to 

their statement, nearly 50 percent of military wives do not work, 

and many of these families are already strained with 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 rule, the responsibility 

for enforcement resides with the Consumer Financial Protection 

Bureau (CFPB). 

Mr. Cordray, the Director, has indicated a willingness to provide 

greater clarity on this issue within the next 30 days. And I strongly 

urge him to do that. If legislation is necessary, we are prepared to 

act. I look forward to hearing from our two panels today. I hope 

Ms. Hillebrand will be able to provide an update on the CFPB’s intention to rectify this rule. 

And our second panel will be able to provide the members of the 

subcommittee with a better sense of how this rule is potentially 

limiting credit to consumers. On a personal note, I spent 15 years 

as a stay-at-home mom, and I realize the work that is done at 

home, whether it is a mom or dad staying home to raise a family, 

while uncompensated, is exceedingly important to the livelihood of 

the entire family. And we, as a household, worked together. I did 

a lot of the financial planning, all of the health planing, wrote all 

the checks and all those things when I was in that position. 

I did give that position up when I was elected to Congress, I will 

say that. And so I understand really, this kind of hits me close to 

home, and I think it is really important for our stay-at-home 

spouses to be able to access credit. You never know when an emergency is going to come up, you never know when you are going to 

need it, and I think establishing credit is always a good thing. A 

lot of times, folks who are being denied credit have great credit 

scores, so it is not based on a credit score. It is simply based on 

whether or not you have income, which makes sense, and there are 

counter arguments to this as well. 

With that, I would like to recognize Ranking Member Maloney 

for the purpose of making an opening statement. 

Mrs. MALONEY. First of all, I would like to welcome the witnesses, and thank the chairwoman for holding this hearing. I beVerDate Nov 24 2008 19:31 Oct 12, 2012 Jkt 076104 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 K:\DOCS\76104.TXT TERRIE
3 

lieve it is a tremendously important issue, one that I have been 

working on for years, and I believe that this hearing is going to be 

helpful to focus the attention on it that it deserves. 

We have just passed the 3-year anniversary of the Credit Cardholders’ Bill of Rights, which I am proud to have authored during 

my time as Chair of this subcommittee. Because of the CARD Act, 

consumers have benefited from curbs on some traps and really 

tricks that card issuers use, such as raising rates any time for any 

reason retroactively on their balance, even if they paid on time and 

did not go over their limit. There are a whole host of improvements 

that really leveled the playing field between the consumer and the 

issuer. The Pew Charitable Trust did an independent report that 

stated that the CARD Act saved $10 billion in its first year, saved 

that for consumers, and complaints about credit cards have declined dramatically. 

So the CARD Act, in many ways, is working for American families, but unfortunately, a Federal Reserve rule implementing a provision of the CARD Act, I believe was wrong, and misinterpreted 

the congressional intent in the area of the consumer’s ability to 

repay their credit obligation. 

The CARD Act contained two standards for assessing a consumers ability to pay: one for consumers under 21 years of age; and 

one for everyone else. The rationale was that students should not 

be able to rely on their parents’ income to take out a credit card. 

Students, therefore, were required to show an independent means 

of income. All others were required to merely show an ability to 

pay. 

In implementing the CARD Act, the Federal Reserve really did 

not keep the two standards and required everyone to show an independent ability to pay. I have met with them, along with Congresswoman Slaughter and others, numerous times on this, and because 

of their rule, that is why we are in the situation we are in today 

with the concern that stay-at-home spouses who do not have an 

independent form of income, but who have access to income, often 

control the family spending, as the chairwoman mentioned, often 

have assets, but they will not be able to take out a credit card 

without the consent of their spouse. 

I certainly didn’t come to Congress to roll back women’s access 

to credit in any way, shape or form. And I feel this is an important 

issue. It harkens back to the dark days that I can remember when 

a woman had to obtain her husband’s permission to open a checking account. This missing interpretation, this rule threatens the 

ability of those spouses who are stay-at-home moms to build their 

own credit histories and establish financial independence; this is 

very important. And as soon as the Fed put out its rule for comment, Congresswoman Slaughter and I met with the Fed, we wrote 

the Fed urging it to adopt the two different standards that were 

contained in the CARD Act. And we wrote again when the Fed 

adopted its final role urging it to study the issue and make changes 

to the rule if a negative impact was found. 

We also wrote when the CFPB opened its doors in January and 

took jurisdiction over the CARD Act to ensure that it would study 

this and make changes if necessary. And I would ask unanimous 

4 

consent to put those letters to the CFPB and to the Fed into the 

record. 

Chairwoman CAPITO. Without objection, it is so ordered. 

Mrs. MALONEY. The CFPB has the authority to change this rule 

without legislation. They have recognized that, and they have assured us that they are looking at this and will address it. I look 

forward to their comments. I believe you said in 30 days, they will 

be coming back, and I think that is important. 

One thing we do not want is to find out that there has been a 

negative impact on the ability of stay-at-home spouses to secure a 

line of credit in their own names. This is the wrong direction for 

women or anyone who supports their families by working in the 

home. I understand that an argument has been put forward by 

some groups, and they have said that spouses can find themselves 

in a whole host of circumstances where they can no longer rely on 

family income to repay their debt. They cite divorce, for example. 

The same is true if a spouse loses their job, gets sick or has some 

other change in their financial circumstances. 

However, the mere possibility of future adverse events is not and 

should not be how stay-at-home spouses are assessed for credit. So, 

I look forward to the witnesses today. And again, I think the chairwoman for calling this hearing. It is really important, and I hope 

we can get the changes that we need. I yield back. 

Chairwoman CAPITO. Thank you. 

I now recognize Chairman Bachus, the chairman of the full Financial Services Committee, for 3 minutes. 

Chairman BACHUS. Thank you, Madam Chairwoman, for calling 

this important hearing. The way consumers pay for products and 

services is dramatically changing. Electronic payments through 

credit cards and debit cards now account for more than half of all 

transactions. Given the critical role that credit cards have come to 

play for individuals and the economy, Congress must protect consumers from unfair and deceptive credit card practices and ensure 

they receive useful and complete disclosures about the terms and 

conditions governing their cards. The policymakers must also keep 

in mind that protecting some individuals often results in imposing 

costs on others. 

During the debate over the CARD Act, many of us warned that 

it would penalize some of the most responsible users of credit. Unfortunately, as we hear today, this has proven to be true. When 

Congress passed the CARD Act 3 years ago, no one imagined that 

the regulators would draft rules that discriminate against stay-athome spouses. No one imagined that moms and dads who stay 

home to take care of their children while their husbands and wives 

go off to paid jobs, and as Chairwoman Capito said, sometimes to 

fight wars, would be denied access to credit because of their 

choices. 

We must change the rules. I commend Chairwoman Capito and 

Ranking Member Maloney for working on a bill that I support, that 

ensures that regulators do not interpret the CARD Act in ways 

that discriminate against stay-at-home moms and other spouses 

who earn less than their husbands or wives. I look forward to the 

testimony of Ms. Hillebrand, and I yield back the balance of my 

time. 

5 

Chairwoman CAPITO. The gentleman yields back. The gentleman 

from Georgia for 3 minutes, Mr. Scott. 

Mr. SCOTT. Thank you very much, Madam Chairwoman. I, too, 

think this is a very good hearing on the Federal Reserve’s final rule 

on the CARD Act’s ability to repay. But here is my main concern, 

and a couple of my colleagues have also expressed it: My main concern with the Fed’s final rule is that it does not take into account 

the combined creditworthiness of married couples. For example, if 

spouse A is gainfully employed, but spouse B is unemployed, but 

yet looking for work, spouse B is not able to open a credit card account under the terms of this rule. And this is the main problem. 

This also holds true for spouses who choose not to work outside 

the home. While they have no independent source of income, they 

are supported by their spouse, who does receive an income. Nevertheless, the Fed’s rule would restrict access to credit to just those 

individuals who receive an income and this would unjustly exclude 

such spouses as stay-at-home moms and dads. I think that we certainly want to correct that within the rule. I think that is a major 

flaw in the rule. And hopefully, we will move to correct that. Thank 

you, Madam Chairwoman. 

Chairwoman CAPITO. Thank you. I believe that concludes our 

opening statements. We will begin with our first panel. First of all, 

I would like to thank Mr. Cordray, who is the Director of the 

CFPB. We have had several conversations in which both the ranking member and I emphasized the importance of having a witness 

from the CFPB. I know he has a conflict today, he explained that, 

but I really appreciate Ms. Gail Hillebrand coming today to help 

us out here. She is the Associate Director of Consumer Education 

and Engagement at the CFPB. Welcome. 

STATEMENT OF GAIL HILLEBRAND, ASSOCIATE DIRECTOR, 

CONSUMER EDUCATION AND ENGAGEMENT, CONSUMER FINANCIAL PROTECTION BUREAU (CFPB) 

Ms. HILLEBRAND. Thank you. Chairwoman Capito, Ranking 

Member Maloney, and members of the subcommittee, thank you for 

the opportunity to testify before this subcommittee, and for the 

leadership you have already shown on this issue. 

My name is Gail Hillebrand, and I am the Associate Director for 

Consumer Education and Engagement at the Consumer Financial 

Protection Bureau. I am honored to represent the Bureau here this 

afternoon. 

Today’s hearing is focused on a rule issued by the Board of Governors of the Federal Reserve System last April, and inherited by 

the CFPB on July 21st of last year. The rule implements the general ability to pay provision of the Credit CARD Act. The CARD 

Act, as you know, addresses a series of problems that existed in the 

credit card marketplace when the Act was passed in 2009. Overall, 

the CARD Act illustrates how sensible regulation can make life 

better, both for consumers and for responsible providers of consumer financial products and services. To give just one example, 

now consumers know when their payment is due because the date 

doesn’t change every month. 

When a major new set of regulations is put into place, there may 

be areas that warrant re-examination based on the actual experiVerDate Nov 24 2008 19:31 Oct 12, 2012 Jkt 076104 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 K:\DOCS\76104.TXT TERRIE
6 

ence with the regulatory changes. And the CARD Act regulations 

are no exception. Concerns have been raised that one element of 

the CARD Act, the ability to pay regulation, may have unintended 

and negative effects on stay-at-home spouses. The CARD Act says 

that a credit card issuer cannot open an account for a consumer 

unless the issuer considers the ability of the consumer to make the 

required payments. The Federal Reserve Board issued regulations 

to implement this provision, and then it amended those regulations 

to specify that when a consumer applied individually for credit card 

accounts, the credit card issuer must consider the consumer’s independent ability to make the payments. 

The Federal Reserve says, in essence, that only the income or assets of a person who is liable for the debt could be counted in considering the ability to pay. 

Concerns have been raised about the impact that this rule could 

have on the availability of credit for those who are not employed 

outside the home or who work part-time outside the home. In some 

families, all of the adults are employed outside the home, and in 

others, someone stays home or works part-time. This is often, although not always, a woman. 

Concerns have been voiced that the ability to pay rule could have 

the effect of limiting access to credit for a spouse who is not employed outside the home or who is employed part-time and who 

wants to open an individual credit card account rather than opening a joint account. 

Here is what we have done at the Bureau about this issue so far. 

The regulation went into effect on October 1, 2011. On December 

5, 2011, the Bureau issued a request for information seeking public 

input to identify areas for improvement in a broad variety of rules 

that the Bureau had inherited from other agencies. In that public 

notice, the Bureau specifically identified the CARD Act’s ability to 

pay regulation as one potential area for change. 

We acknowledged at that time that this rule may have the unintended consequence of precluding some individuals from obtaining 

credit that they are capable of repaying. We sought public comment 

on whether the specific regulation should be amended, and if so, 

how. We also encouraged the commenters to submit or identify 

data that the Bureau could use to analyze, and if possible, to quantify the potential costs and benefits of any changes they proposed, 

including a change in this ability to pay regulation. 

In addition, while the comment period was open, we reached out 

to the credit card industry to request information from credit card 

issuers about the impact of this provision. The formal request for 

information set up a comment period until May 5, 2012, plus another 30 days for a reply to those comments. We extended the reply 

period to a total of 60 days in response to requests that people 

needed more time. This reply period just closed on Monday, June 

4th, 2 days ago. We are now in the process of reviewing those responses as well as input we received from the individuals who have 

petitioned the Bureau to express their concerns. 

In examining the ability to pay issue, the Bureau starts from 

three basic principles. First, we understand the importance of 

availability of credit to consumers and we are committed to promoting access to credit on a fair, equitable, and non-discriminatory 

7 

basis. Second, we are equally committed to ensuring that lenders 

make loans that they reasonably believe consumers can afford to 

repay. No one benefits and everyone loses when loans are made to 

consumers who cannot pay them back. 

And third, where we are called upon to make decisions addressing the balance between the goal of access and the ability to repay, 

those decisions should be grounded in the best available evidence 

of the actual impact of the proposed rule, or the particular rule. 

The Bureau had anticipated that those credit card issuers who recommended a change in the rule would have provided evidence 

about the actual impact of the ability to pay regulation, along with 

their comments suggesting a change in that regulation. Our preliminary review of the comments received suggests that they did 

not. We have asked a number of card issuers to share with us specific data that will bear further on this issue. 

In light of the public concern and our ongoing responsibility for 

this regulation, we are looking closely at the regulation and the related commentary. We are looking to see if we can provide further 

clarity to mitigate the risk that stay-at-home spouses might be denied credit that they can, in fact, afford to repay. This examination 

will also have to consider the potential for other unintended consequences from specific changes to the rule of the commentary. 

The Bureau is carefully considering options for providing guidance to bring greater clarity to the marketplace, and to mitigate 

potential negative consequences from the Board’s rule. We expect 

to make a determination soon about how best to proceed. We intend to move forward as appropriate during the course of this summer. 

In conclusion, the Bureau is committed to ensuring both access 

to credit and that consumers who obtain credit have the ability to 

repay. The Bureau is actively evaluating the regulation that we inherited from the Federal Reserve Board to ensure that both of 

these goals are served. Thank you for the opportunity to testify 

today. I look forward to answering your questions. 

[The prepared statement of Associate Director Hillebrand can be 

found on page 32 of the appendix.] 

Chairwoman CAPITO. Thank you. 

I appreciate that, and I will begin the questions. As you know, 

a group of us, Members of Congress, sent a letter to the CFPB, I 

believe it was a bipartisan letter, in December about the rule, and 

you have pretty much outlined, I guess immediately after that, you 

opened it up for comment again; is that correct? 

Ms. HILLEBRAND. I believe we received that letter dated December 6th, and we actually filed our request for comment on December 5th, but those two events were fairly contemporaneous, yes. 

Chairwoman CAPITO. And then in the process of standing up to 

CFPB from July to, say, December, was this rule that was discussed or—I am certain there was a flurry of activity there, but 

how did the conversion from the Fed to the CFPB move forward 

from that time, from July to December? Was there a lot of discussion about this or did we already know it was know it was an issue 

that was causing problems? Did you already know it was an issue. 

Ms. HILLEBRAND. Thank you for that question. Certainly, the fact 

that you wrote the Fed about this in May and copied us, told us 

8 

there was an issue here. As we looked at which examples we 

should pull out to identify specifically to seek public comment 

upon, we included this in that list. We did that just 2 months after 

the regulation went into effect. 

Chairwoman CAPITO. Then, the other question I have is—I have 

other questions, but one of the questions I have as we look at this, 

obviously this was part of a legislative effort under the CARD Act, 

then it was an interpretation by the Federal Reserve. And I don’t 

know if you can help me out with this because I know you are in 

the process of looking at this, but do you anticipate that this is a 

legislative fix or is it a regulatory fix? You mentioned in your statement guidance, how do you see something like this rolling out in 

terms of either regulatory guidance or legislation? 

Ms. HILLEBRAND. Of course, as you know, our job is to look at 

the regulatory side of that question. We are actively examining the 

regulation, as well as the official staff commentary, to determine if 

we can make appropriate progress on the regulatory side. 

Chairwoman CAPITO. You mentioned in your statement that you 

didn’t get data from the issuers. Do you mean, for example, how 

many people have been turned down, and in what circumstances. 

Is that the kind of data you are talking about? 

Ms. HILLEBRAND. Yes, we did not receive enough data to determine how many people are being turned down, etc. We are still actively seeking that. 

Chairwoman CAPITO. Have you had an progress in that? Are the 

issuers coming forward with that data for you? 

Ms. HILLEBRAND. We are cautiously optimistic based on conversations that are currently occurring. 

Chairwoman CAPITO. I notice that CFPB has a call-in line or a 

complaint line on your Web site. Have you received any notions 

about this issue through your phone line or your email line where 

you solicit complaints or concerns? 

Ms. HILLEBRAND. Thank you for mentioning our consumer response line. For Members who want to provide that to their constituents, it is 1–855–411–CFPB, and also can be found at 

consumerfinance.gov. 

We have published two reports about the nature of the complaints we are receiving on credit cards. We published one report 

covering about the first 3 months of the complaint line, and another one that covered July 21st through the end of the calendar 

year. The second one was in our Semi-Annual Report to Congress. 

We found that the top three types of complaints we received about 

credit cards fell into the same three categories for both of those 

time periods. Those three categories are: billing disputes; reports of 

identity theft, fraud, and embezzlement; and complaints about the 

APR or interest rates. These categories of major complaints have 

remained steady. 

Chairwoman CAPITO. So complaints on being denied credit are 

obviously not in the top three as far as you can tell? 

Ms. HILLEBRAND. That is correct. 

Chairwoman CAPITO. What about the students under 21 years of 

age? Have you received any data on how that has changed from the 

CARD Act? I know that is separate from the issue we are talking 

about today, but it is wrapped up in the ability to pay rule. What 

9 

have you found in terms of collecting data? Because I know the 

CFPB has talked a lot about being a data-driven agency. 

Ms. HILLEBRAND. We are deeply interested in the problem of students and debt, and the situation that young people find themselves in today, particularly with the high amount of student loan 

debt. We have a special office for students that is studying these 

issues. 

Chairwoman CAPITO. I am talking about credit cards. 

Ms. HILLEBRAND. We are looking at student debt issues generally. I did not look at our complaint data specifically for the question of students and credit cards. We will be happy to get back to 

you and tell you what we have on that. 

Chairwoman CAPITO. I guess the reason I am asking is that we 

already know that some people are being denied credit, who don’t 

have independent incomes or are stay-at-home spouses. I am wondering if the students who don’t have income, or who have minimal 

income, are being denied credit as well? That is obviously one of 

the points of the CARD Act, so that would be a good thing. 

I now yield time 5 minutes to the ranking member for questions. 

Mrs. MALONEY. When you put it out for comment, how many 

comments did you get back on this? 

Ms. HILLEBRAND. They go through regulations.gov, so it is hard 

to know right after the comment period closes, which was only 2 

days ago. We estimated there are 400 to 500 comments that we 

have received, on the streamlining notice as a whole, which included this and other topics. So we have to go through these to see 

how many are out there. 

Mrs. MALONEY. Okay. And as I said in my statement, many of 

us believe that the Federal Reserve misinterpreted the CARD Act’s 

provision, which set one ability to pay standard for consumers 

under age 21, probably students, and a different ability to pay 

standard for consumers age 21 and older. In your opinion, does the 

Federal Reserve adoption of the same standard for all consumers, 

regardless of age, conflict with congressional intent? I don’t feel we 

could have been any clearer. 

Ms. HILLEBRAND. Thank you for that question, Congresswoman 

Maloney. We will be looking carefully at all of the information, at 

the statute, at the regulation, at the data, and at the public comments. We will be doing that. 

Mrs. MALONEY. And as you said, you haven’t drawn any conclusions yet, but can you elaborate a little bit on what your process 

is, what you are going through on this issue? You had the comment 

period, and then you are going to review that, what exactly is your 

process on this? 

Ms. HILLEBRAND. Thank you for that question. We have completed the comment period. It takes awhile to get comments from 

regulations.gov, so they are coming in now. We have some work to 

do since we have 400 to 500 comments to look at. We have also received other types of information from the public. I am quite certain that things will be said at this hearing that we will want to 

think about as well. And then, we will make some decisions. 

Mrs. MALONEY. How did issuers assess a consumer’s ability to 

pay prior to the enactment of the CARD Act? They assessed it as 

10 

family income, right? How do the issuers look at it prior to the Federal Reserve’s interpretation? 

Ms. HILLEBRAND. One of the questions that we hope the issuers 

will have addressed in their comments to us is, have they changed 

the questions that that they ask on the application? Are they asking something different now than before? What are they asking? 

Have they thought about asking other questions that might help 

these consumers qualify? 

Mrs. MALONEY. And does a married spouse or domestic partner 

who has no individual income have a different level of access to a 

claim on household income than a student or someone under the 

age of 21? 

Ms. HILLEBRAND. I think that might be a question for a State 

law, which does vary in terms of who has a legal claim to income. 

We are looking at the statutory language of the CARD Act and at 

our Dodd-Frank mandate to encourage access to credit, and will be 

balancing those two factors with the facts. 

Mrs. MALONEY. Many people feel very strongly about this. Do 

you think we will need legislation to correct this, or do you believe 

the CFPB has the authority under existing statutes to provide a solution? Do you have the flexibility to come forward with a rule, or 

will we have to legislate this change? 

Ms. HILLEBRAND. The Bureau has full authority to amend this 

regulation or the commentary. 

Mrs. MALONEY. So you could amend the rule and change it and 

it would have force of law? 

Ms. HILLEBRAND. We can certainly amend the regulation consistent with the statute. We can’t do anything we want, but consistent with the statute, we can amend the regulation and we are 

looking at that possibility. 

Mrs. MALONEY. What is your sense of time for taking action? 

Ms. HILLEBRAND. We intend to make a determination soon about 

how best to proceed. And we do intend to move forward as appropriate during the course of this summer. 

Mrs. MALONEY. So could you say 30 days, 45 days? Do you have 

a timeframe? 

Ms. HILLEBRAND. Summer goes until mid-to-late September. We 

have 400 to 500 comments, we are digging through them, we asked 

for more evidence, and we will be digging through that. Then, we 

will do the job in light of what the public has told us and what the 

evidence shows. 

Mrs. MALONEY. Thank you. I hope you come forward with a 

forceful rule and change it back to one that allows spouses to have 

access to credit. 

Ms. HILLEBRAND. Thank you. 

Mrs. MALONEY. That was the standard long before this Federal 

Reserve rule came into effect. 

I do want to say that some people are saying there could be a 

problem later on, a divorce, or this, that, or the other, but you don’t 

legislate that; you don’t look ahead for those types of negative 

downturns. My time has expired. Thank you. 

Mr. RENACCI [presiding]. Thank you, Ms. Maloney. I now recognize myself for 5 minutes. 

11 

Thank you, Ms. Hillebrand, for being here. Many letters sent to 

the Federal Reserve during the ability to pay rule comment period 

suggested the rule was offensive, dismissive, and discriminatory towards women, especially nonworking wives, women in military 

families, and widows, and many of us agree. Do you believe the Fed 

incorporated these comments into its final ability to pay rule and 

does the CFPB take a different view? 

Ms. HILLEBRAND. Thank you for that question. Of course, I can’t 

speak to the internal processes at the Board of Governors at the 

time this was adopted by them. I can tell you that we will be looking at all perspectives and all of the available information in making a decision whether or not there should be a change to this regulation. 

Mr. RENACCI. In regards to the same issue as far as household 

income, can you explain why total household income could not be 

the best measure of an individual’s ability to pay credit card debt? 

I know I am looking into the future for you, but I am trying to get 

your thoughts into the future when you are analyzing all these letters that you are getting. 

Ms. HILLEBRAND. Thank you. Of course, I can’t tell you how it 

is going to come out. I can tell you that we are looking at the text 

of the CARD Act, the statutory text. We will be looking at the evidence, we will be looking at the public comments that have been 

filed, we will be reading what people said here today and determining if there is a change that can be made. 

Mr. RENACCI. Okay. I am not sure you have seen this, but in Mr. 

Ireland’s written testimony, he said that the current independent 

ability to pay rule is a step backward for human dignity and social 

equality and the cost is far greater than the costs in terms of dollars and cents. Does the CFPB share his assessment that this rule 

could be a setback to the Equal Credit Opportunity Act and reduce 

access to credit for stay-at-home spouses? 

Ms. HILLEBRAND. We have heard that concern expressed by the 

public and will be taking it into account, very seriously. 

Mr. RENACCI. I yield back the remainder of my time, and recognize the gentlewoman from New York, Ms. McCarthy, for 5 minutes. 

Mrs. MCCARTHY OF NEW YORK. Thank you, and thank you for 

having this hearing so that we can try to clear up this issue. 

Ms. Hillebrand, I understand that you are all looking at this 

issue. We also have been seeing what the potential negative impacts of the current ability to pay provision is doing. I was just 

wondering what kind of research and data you are collecting from 

the credit card companies to see who is worthy of getting a credit 

card, and also, it was mentioned a little bit here too, how are you 

looking out for our military families, being that we have usually 

one spouse at home, and one spouse possibly being deployed, how 

has the ability to pay provision impacted our military community? 

They are at an extreme disadvantage if one spouse is deployed and 

not able to fill out the credit form on behalf of the stay-at-home 

spouse. 

Ms. HILLEBRAND. Thank you. You identified exactly the questions we are trying to get information about from the card issuers 

who serve these communities. Have they changed their underVerDate Nov 24 2008 19:31 Oct 12, 2012 Jkt 076104 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 K:\DOCS\76104.TXT TERRIE
12 

writing? Are they denying more people? What do we know about 

the gender or other characteristics of those people? We don’t have 

that information from them yet; we are still trying to get it. 

I will say on the issue of military families, the Bureau is deeply 

committed to helping to encourage practices in the financial services marketplace that serves military families. We have a special 

office in my division, the Office of Servicemember Affairs, run by 

my friend and colleague, Holly Petraeus, specifically looking at 

issues that affect military families. There has been some progress 

in recent months on the issue of Permanent Change of Station Orders and how that affects military families and their financial situations, but that is a different issue than today’s topic. We are deeply interested in making certain that those who protect and serve 

us are protected and served by the Bureau and by the financial 

system. 

Mrs. MCCARTHY OF NEW YORK. Thank you. I guess what I am 

trying to figure out—our intent was never to go where we are going 

right now. The intent was really looking at our young college kids 

who were abusing credit cards, not realizing they actually had to 

pay them off some time. 

And I thank you for trying to unwind this, because we certainly 

don’t want to penalize anybody. If you are married, and you are basically working with your spouse to pay all the bills and everything, that is basically something that has been going on forever. 

We do certainly have an awful lot of single moms out there too, and 

the only way you can really move ahead is by having—I can think 

of going way back when I was young trying to get a credit card, 

obviously I just started a job, it was really low paying, but there 

was a department store that looked at women like me and was able 

to give me a credit card. 

And with that, I would spend every month, but pay it off every 

month, until I could build it up and then go up to a better credit 

card. That is the only way you can build up credit which, in this 

world today, that is what you need. So I think the intent was excellent. I just think that we need to work this over and hopefully, 

with your help, we will be able to. Thank you, I yield back. 

Mr. RENACCI. Thank you, Mrs. McCarthy. I now yield 5 minutes 

to the gentleman from Missouri, Mr. Luetkemeyer, for questions. 

Mr. LUETKEMEYER. Thank you, Mr. Chairman. 

Ms. Hillebrand, I just left a meeting a while ago, and we were 

discussing with the groups who were there, the unintended consequences of bureaucratic rules that they were going to have to live 

with. It seems we are having a hearing here today in the same situation. We have the government trying to make rules, bureaucratic 

rules to try and implement things that they think are righting 

wrongs that they see out there. Now, we have unintended consequences that we have to deal with again. It is frustrating to see 

this. 

I hope that you take from this as a CFPB which has the rulemaking authority to make sure that when you promulgate a rule, 

you don’t have these unintended consequences, and you thoroughly 

study this, and you thoroughly go through it with all the documents and all the documentation statistics that makes sure it 

doesn’t happen again. Because I am sure as your Bureau goes 

13 

through the rulemaking process here shortly, with all the rules you 

will have to implement with all the Dodd-Frank stuff, you are 

going to be doing a lot of rulemaking, and I hope you take a lesson 

from this. Are we connecting? 

Ms. HILLEBRAND. Yes, Congressman, we certainly are. 

Mr. LUETKEMEYER. Okay. I understand that not only do you 

make this rule when you promulgate it, but there is also a cost to 

it for the compliance by that individual entity or group or whatever, and that cost needs to be factored in as well. I think it is very 

important. 

Ms. HILLEBRAND. Yes. 

Mr. LUETKEMEYER. It is interesting. First, we are trying to set 

standards—this particular group of people had access to credit but 

it wasn’t good enough, so now we have to make sure they don’t 

have access to credit, and now we have let the pendulum swing too 

far, so now we have to go back and make sure they have access 

to credit. The pendulum is going back and forth, back and forth. 

It is government in the middle of something that really is a private 

sector matter, I think. Let the private sector decide who can get 

credit because at the end of the day, they are the ones who have 

the risk, they are the ones who put their own assets on the line 

to provide coverage for somebody if they pay their bills with a credit card. 

It is interesting that we in the government think that we can do 

a better job of managing their businesses than they can. I think, 

again, it goes back to the rules that we are promulgating, and we 

have to be very careful with those, because now we have a situation where we have some unintended consequences with the individuals who were single, through no fault of their own perhaps, or 

whatever their lifestyle or situation is, and there we are. 

When you were discussing with—I know Ms. McCarthy asked 

the question with regards to information that you are getting from 

individual companies, the credit card companies themselves. Is that 

information proprietary or does it have to comply with some privacy laws or anything to get that from them, or do you just have 

full access to it and they just haven’t complied yet? 

Ms. HILLEBRAND. We have made a request for voluntary submission of information. We are not requesting any personal 

indentifiable information; we are not asking for people’s Social Security numbers or any of that sort of thing. 

Mr. LUETKEMEYER. So at this point, you haven’t received information from—you don’t know the impact that it is having on access 

to credit for individuals who are single that have some sort of identifiable income? 

Ms. HILLEBRAND. We have received some information from one 

issuer, and it is not sufficient to answer this question. We are actively seeking additional information. 

Mr. LUETKEMEYER. Whenever you get done with this, you have 

the full power, as I understand, to change regulations. It is a Federal Reserve regulation that you now are authorized to enforce and 

you have the full authority to amend it as you see fit; is that correct? 

Ms. HILLEBRAND. We have the full authority to amend the regulation consistent with the statute itself. 

14 

Mr. LUETKEMEYER. I’m sorry? 

Ms. HILLEBRAND. Consistent with the statute itself. 

Mr. LUETKEMEYER. Okay. Do you have a timeframe? I know you 

have the question already that with regards to how you are going 

to be through this, but I didn’t hear any timeframes. Can you give 

me a timeframe? Is it going to be 30 days, 6 months, 3 years, just 

boil it down to some general timeframes. 

Ms. HILLEBRAND. I will give you the best timeframe that I can. 

Mr. LUETKEMEYER. Okay. 

Ms. HILLEBRAND. We expect to make a determination soon about 

how to best proceed, and we intend to move forward as appropriate 

during the course of this summer. 

Mr. LUETKEMEYER. I’m sorry? 

Ms. HILLEBRAND. This summer. 

Mr. LUETKEMEYER. So by the first of October, roughly, we should 

have a rule, consumed all the information and come up with a final 

decision what you are going to do with this rule? 

Ms. HILLEBRAND. That is our present intent, sir. 

Mr. LUETKEMEYER. Interesting. With that, Mr. Chairman, I see 

my time is about up. I will close and yield back the balance of my 

time. Thank you. 

Mr. RENACCI. Thank you, Mr. Luetkemeyer. I want to thank you, 

Ms. Hillebrand, for being here. The Chair notes that some Members may have additional questions for this witness, which they 

may wish to submit in writing. Without objection, the hearing 

record will remain open for 30 days for Members to submit written 

questions to this witness and to place her responses in the record. 

And you are dismissed at this time. Thank you. 

Ms. HILLEBRAND. Thank you, sir. 

Mr. RENACCI. I want to welcome the second panel this afternoon, 

and recognize each of them for their statements. The first will be 

Mr. Kirk Semme, senior vice president, Charming Shoppes, Inc., on 

behalf of the National Retail Federation. 

STATEMENT OF KIRK SIMME, SENIOR VICE PRESIDENT, AND 

TREASURER, CREDIT AND CORPORATE FINANCE, CHARMING SHOPPES, INC., ON BEHALF OF THE NATIONAL RETAIL 

FEDERATION 

Mr. SIMME. Thank you, Chairwoman Capito, Ranking Member 

Maloney, and members of the subcommittee. I am honored to appear before the subcommittee today. My name is Kirk Simme, and 

I am the senior vice president and treasurer, credit and corporate 

finance, for Charming Shoppes. We are a leading women’s apparel 

operator for women’s apparel for Lane Bryant, Fashion Bug, and 

Catherines Plus Stores. We operate more than 1,800 stores nationwide, along with related e-commerce Web sites. 

In my capacity, I oversee the company’s proprietary credit card 

operations. And I was previously the president of the Spirit of 

America National Bank, the company’s wholly owned credit card 

bank which manages private label credit card operations. 

We currently have more that 2.7 million credit card accounts, 

which represents approximately 4 percent of the U.S. female population. I am here today on behalf of the National Retail Federation 

to testify about the Federal Reserve Board’s final rules of the 

15 

CARD Act of 2009 clarifying the requirements pertaining to if a 

cardholder has the ability to make the required minimum payments. 

Just like us, many NRF members offer credit to our customers 

through proprietary and private label credit cards, and thus, we 

and our customers are interested in and affected by the final Fed 

rule. In an effort to address the concern that some customers under 

the age of 21 may be overloaded with debt, the CARD Act contained a provision requiring these consumers, when applying for a 

credit card, to affirmatively demonstrate they had income or assets 

necessary to repay any grant or extensions of credit line. Given 

their young age, many do not have substantial credit histories sufficient for all credit grantor’s to make sufficiently precise decisions, 

thus the requirement to explicitly demonstrate sufficient income or 

assets, we believe is reasonable. 

However, when issuing the rules in March of 2011, the Federal 

Reserve Board went too far, and affected the ability of credit card 

issuers to rely upon household income when issuing credit, and 

considering increases in credit limits even when the applicant is 

above the age of majority. In doing so, the Board ignored the CARD 

Act’s distinction between an explicit income determination for minors and the more generalized ability to pay the determination for 

adults. 

Instead, under the Federal rule, the credit grantor is required to 

consider a consumer’s independent ability to make the required 

minimum payments, and under the terms of the account, based 

upon consumer’s independent income or assets and current obligation, regardless of the customer’s age. Historically, credit card 

issuers have been able to make informed decisions on applicants 

over the age of 21, and an ability to repay using their years of repayment behavior. This is an important distinction because adults, 

unlike minors, have managed their own financial affairs which 

have demonstrated through their payment records and their credit 

information which we as retailers have used as a way of predicting 

the probability of repayment, have always considered the ability to 

repay in making decisions that we extend to our customers. 

Techniques including automated inquiries to credit reports, credit scores, and other consumer’s individualized performance are the 

measures that we use in terms of determining a customer’s ability 

to pay. As a former bank president, I know that both independently 

and the private label contacts, retailers and our bank partners 

have always had a vested interest in making prudent credit decisions to be sure their customers continue to pay. 

With respect to the customers we serve, our own surveys indicate 

approximately 1 in every 6 of our customers are homemakers, and 

1 in 6 are retired. By imposing these ill-considered income requirements on adults, I believe the Federal Reserve has caused the following consequence which could affect millions of people. Stay-athome spouses are adversely impacted in a significant manner; their 

ability to establish their own credit histories and obtain credit lines 

is severely encumbered. The Board suggestion that stay-at-home 

spouses who are predominantly women can open joint accounts, or 

as an authorized user, ignores the vital role that these women play 

in their households. They are responsible for running the houseVerDate Nov 24 2008 19:31 Oct 12, 2012 Jkt 076104 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 K:\DOCS\76104.TXT TERRIE
16 

holds, managements, finances, and making purchases of household 

items, clothing, furnishings, and much more. Often, these purchases are made during the absence of working spouses at home, 

outside the home, therefore making it an impractical option to open 

a joint account or even get an authorized user. This inconvenience 

is exacerbated for military families because of the increased likelihood that the employed spouse is away from the home. 

We as an organization employ many individuals, and we operate 

in 48 different States, many of which are close to military bases. 

Military families are already making great sacrifices in order to 

serve our country, and they should not be subject to unneeded inconveniences. It is highly unlikely this was Congress’ intent when 

the CARD Act was passed. 

Furthermore, many retailers offer extra discounts or benefits for 

opening new accounts. Without the ability to realistically open a 

new account—and we have seen a decrease in credit card applications—stay-at-home spouses are effectively denied the opportunity 

to save money for their households. Stay-at-home spouses who have 

become widowed, divorced or those who are currently in abusive relationships are placed at a real disadvantage. 

The Federal rule has placed stay-at-home spouses in the untenable position of either lying about their independent income, which 

might border on bank fraud, or if meeting even a modest credit line 

increase, a point of sale potentially being embarrassed in front of 

several other customers when they are declined. Although we do 

not believe that this was intended, the Board’s interpretation of the 

law may have the potential effect to undo many things that were 

provided for women in the past. 

I have submitted these comments previously to the Board, so I 

will continue on to conclusion to wrap up from the time standpoint. 

In conclusion, I believe that Congress should take some further 

action, and the CFPB should revise the rules to reflect Congress’ 

true intent as demonstrated by the legislative language—income 

and asset information should be collected from those below the age 

of minority who cannot demonstrate that they are financially independent of their parents. For those above the age of majority, a 

simple demonstration of the ability to repay is sufficient. If and to 

the extent income data is necessary for making such determination, 

conservative income estimators should be allowed to be used. I am 

pleased to answer any questions, and I thank you for allowing me 

to present my statement. 

[The prepared statement of Mr. Simme can be found on page 45 

of the appendix.] 

Mr. RENACCI. Thank you, Mr. Simme. I now want to recognize 

Mr. Oliver Ireland, partner, Morrison & Foerster, LLP, for 5 minutes. 

STATEMENT OF OLIVER I. IRELAND, PARTNER, MORRISON & 

FOERSTER LLP 

Mr. IRELAND. Good afternoon, Chairwoman Capito, Ranking 

Member Maloney, and members of the subcommittee. My name is 

Oliver Ireland, and I am a partner in the financial services practice 

at Morrison and Foerster’s Washington, D.C. office. I have over 35 

years experience in financial services issues. I worked for the FedVerDate Nov 24 2008 19:31 Oct 12, 2012 Jkt 076104 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 K:\DOCS\76104.TXT TERRIE
17 

eral Reserve System for 26 years, and spent 15 years as an Associate General Counsel at the Board of Governors in Washington, 

D.C. One of my earliest experiences in the Federal Reserve System 

was working on the rules to implement the Equal Credit Opportunity Act, which prohibited discrimination in the granting of credit on the basis of sex and marital status. More recently, I worked 

with credit card issuers to implement the provisions of the Credit 

CARD Act in 2009, including, in particular, the provisions of Section 109 of the Act on ability to pay. 

Credit card issuers have long considered applicants and cardholders’ ability to repay credit card accounts based on sophisticated 

credit risk evaluation models. The statutory language could have 

been implemented by allowing issuers to continue existing practices. Nevertheless, the Board chose to implement this requirement 

by adding the further requirement that the ability to pay determination be based on the consumer’s independent income or assets 

and current obligations. 

Card issuers have found that income is not a particularly useful 

predictor of repayment in the case of smaller lines of credit, although it tends to become relatively more important as the size of 

the credit line increases. In addition, the independent income rule 

fails to recognize that family households are typically joint economic enterprises. For example, the largest part of household debt 

is typically a home mortgage that is a joint obligation of a husband 

and wife. If incomes are considered individually, but debt is considered jointly, this mismatch not only complicates the credit granting 

process, but also demonstrates the basic illogic of the independent 

income approach. 

Second, where a married woman does not work outside the home, 

the married woman may have little or no income to support credit 

in her own name, and therefore may be ineligible to obtain a credit 

card even though she is responsible for managing the household, 

including the family finances. The ability of married women to get 

credit was a key concern of the Equal Credit Opportunity Act. 

The independent income requirement makes it difficult for married women to open credit card accounts, particularly retail accounts because they will have to have their husband complete the 

application. This inconvenience, or in some cases impossibility, can 

translate into lost discounts on in-store purchases. More importantly, the rule is a step backward for human dignity and social 

equity. 

A more practical and equitable rule would base ability to pay on 

the income that an applicant states that the applicant is relying on 

to pay the debt with a safe harbor for consideration of household 

income. While this rule would raise issues as to definition of household, the risk that applicants might list income inappropriately is 

limited and would pose no additional risk to credit card issuers. 

Credit card issuers typically use an ability to pay analysis to deny 

credit that otherwise would be granted rather than to grant credit 

that otherwise would have been denied. 

Further, while extending credit to married women who do not 

work outside the home and who may not be able to rely on future 

income from their husbands in the event the marriage is dissolved 

could conceivably expose credit card issuers to credit risk. This is 

18 

not the only life event that could lead to this result. And I do not 

think that these concerns outweigh the unfair treatment of married 

women and the unintended consequences of the current rule. 

Thank you, and I would be happy to respond to any questions. 

[The prepared statement of Mr. Ireland can be found on page 36 

of the appendix.] 

Chairwoman CAPITO. Thank you. Our final witness is Ms. Ashley 

Boyd, campaign director of MomsRising. Welcome. 

STATEMENT OF ASHLEY BOYD, CAMPAIGN DIRECTOR, 

MOMSRISING 

Ms. BOYD. Thank you. Good afternoon, Chairwoman Capito, 

Ranking Member Maloney, and members of the subcommittee. I 

am Ashley Boyd, campaign director for MomsRising, a nonprofit, 

nonpartisan advocacy organization dedicated to ensuring and protecting family economic security. Since our founding in 2006, 

MomsRising has been fighting for legislation and public and workplace policies that will help families achieve or maintain financial 

stability. Our partners in that fight include over 1 million 

MomsRising members throughout the country and more than 100 

aligned organizations. 

First and foremost, I want to establish that MomsRising fully 

supports the protections of the Credit Accountability Responsibility 

and Disclosure Act. We are, however, concerned and share your 

concern about the unintended consequences of the law on stay-athome parents, widowed or divorced spouses, and spouses in abusive 

relationships. We understand the perils of unpayable credit card 

debt and the burden that can put on individuals and families. We 

applaud all the efforts to protect consumers from the egregious and 

predatory practices some credit card companies engage in, practices 

that can trap people in a cycle of unending and unpayable debt. 

Holding a credit card is a privilege that must be earned by establishing and maintaining good credit. We all know too well that too 

often young adults have not been educated about the importance 

of using credit cards wisely, and have been given excessive lines of 

credit far exceeding their ability to pay. 

We also support the protections in the law that help give American families the tools that they need to strengthen their economic 

security and the protections from misleading and unfair practices 

involving payment due dates, late fees, and over-the-limit fees. 

According to a report recently released by the nonprofit, nonpartisan research and advocacy organization, Demos, because of information which the card companies are now required to provide to 

consumers by the CARD Act, one-third of households are paying 

down their balances more quickly. The Demos report also finds 

that the CARD Act contributed to a dramatic decline in the number of households being charged late fees from half of all households in debt being charged late fees in 2008 to just 28 percent this 

year. Additionally, many fewer households are experiencing increasing interest rates or are being charged over-the-limit fees. 

We applaud these changes and we know that they are increasing 

economic security. Credit cards are a critical financial tool for 

many families. As the economy continues to struggle out of the reVerDate Nov 24 2008 19:31 Oct 12, 2012 Jkt 076104 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 K:\DOCS\76104.TXT TERRIE
19 

cession, some households must rely on credit cards to purchase 

basic necessities such as groceries, household goods, and more. 

While MomsRising strongly supports the CARD Act, we are extremely concerned about this aspect, the Federal Reserve Board’s 

interpretation of the ability to repay provision. 

And that is the reason why I am here today. Requiring a credit 

card company to consider individual rather than household income 

in all cases may unfairly and unreasonably impact stay-at-home 

parents who have contributed to the sound management of their 

household’s finances. It is a reality today that most adults need 

credit cards to establish a credit rating in order to get a mortgage 

or a loan or even to rent a home or apartment. More than convenience, credit cards have become a necessity for many, and that is 

true for stay-at-home parents as well as those in the workplace. 

Last month, MomsRising and Change.org delivered more than 

45,000 signatures on a petition to the Consumer Financial Protection Bureau to reconsider the ability to pay rule. We were able to 

get those signatures because of the moms and other stay-at-home 

parents who have been harmed or could be harmed by this regulation as it stands. We heard from many, many parents, and I want 

to share with you just a couple of stories that we heard. I think 

they illustrate very well this issue. 

Lisa, a stay-at-home mother from Georgia, shared that soon after 

the new rules went into effect, she met her emotionally abusive 

husband and plans to get a divorce against her husband’s wishes. 

In the meantime, she has neither the money to hire a lawyer to 

proceed with the divorce nor access to credit without her husband’s 

approval. Since he is opposed to the divorce, she feels trapped. 

Tricia of Virginia was married for 11 years and a stay-at-home 

mom most of that time. Although she came into the marriage with 

amazing credit, her husband was an irresponsible spender who 

made poor financial decisions, leaving them both with terrible credit histories. After her husband left her and her children recently, 

Tricia struggled to get any credit in her name due to this poor financial management and having no credit cards solely in her 

name. This has had devastating consequences for her as she tries 

to make her way forward and be a responsible mother. And I 

thought I would share with you directly what she said. She says, 

‘‘I am not a fan of credit cards but trying to get a rental house was 

a huge nightmare because I was a stay-at-home mom at the time 

and all the agencies required my husband to co-sign on our lease 

due to my limited credit history. I can’t get a loan for a new car 

even though the 13-year old one that I have has cost us more in 

repairs than the monthly payment a more decent one would. It has 

come up against me and my children and has made it extremely 

difficult for me to obtain any kind of security and peace of mind 

that I need to start over.’’ 

In conclusion, I want to share that rejecting household income as 

a basis for credit card qualification sends an insulting message that 

stay-at-home parents have no economic value and are as credit unworthy as an unemployed college student. In reality, they contribute as much to their household’s credit rating as the family 

breadwinner because in most cases, they are responsible for managing their family’s budget. We believe that stay-at-home parents 

20 

should be exempt from the current interpretation of the ability to 

repay provision of the CARD Act if data show the interpretation is 

truly unfairly limiting credit for them. 

We fully support and applaud the goals of the CARD Act and the 

ability to pay provision of the Act. However, the Federal Reserve’s 

interpretation of this provision has created unintended consequences by unfairly punishing parents who do not work for pay 

outside the home. This must be addressed. Chairwoman Capito and 

members of the subcommittee, I thank you for the opportunity to 

address this issue. Thank you for taking the time to listen to me, 

and most importantly, to the voices of moms and dads across the 

country who know that a credit card is an essential financial tool 

in today’s society. Thank you. 

[The prepared statement of Ms. Boyd can be found on page 28 

of the appendix.] 

Chairwoman CAPITO. Thank you. I want to thank all of you. I 

would like to ask unanimous consent to insert the following statements into the record: USAA; the Financial Services Roundtable; 

the Retail Industry Leaders of America; the ICBA; and Women Impacting Public Policy. So without objection, I will insert those into 

the record, and I will begin my questions. 

Mr. Ireland, in some of the reading about this, there was some 

discussion about the difference between an ability to pay and a 

credit history or a credit score. I alluded to it in my opening statement, that somebody who doesn’t have independent income can 

have, in some ways, a better credit record, a better credit score 

than those who do have an independent income. Do you have any 

correlations on that or how this rule could be reformed to look more 

maybe at credit history or credit score as opposed to independent 

income? 

Mr. IRELAND. Chairwoman Capito, when we looked at the language of the CARD Act as the CARD Act was passed, working with 

issuers, they didn’t really have any problem with it because that 

is what issuers did. And historically, they analyze ability to repay. 

They don’t want to grant unsecured credit to someone who can’t 

repay. A mortgage is a different issue because you have an asset 

to go after. If you are granting credit card credit, all you have is 

their ability and willingness to repay, and so credit card issuers 

typically have fairly sophisticated models that they have developed 

over years that include credit scores, their own experience, and so 

on to analyze a credit risk for relatively small lines, until you get 

into very large credit lines, which often turn out to be small businesses. For example, income is not a very good predictor of credit 

risk. And so, while some issuers would ask for income, they would 

use that for line assignment purposes, size of the line assignment, 

if somebody was seeking a particularly big line, but they would rely 

on the credit risk matrix that they had for granting credit. 

When the Fed proposed the original rule, they didn’t have the 

independent language in there, and people had to focus on income 

and assets which, in some cases, would require people to ask additional questions, and to factor that in. And then when they added 

an independent, it threw a monkey wrench into the whole system. 

But the procedural way that most issuers use this is they run 

somebody through their risk matrix and say, do you pass my risk 

21 

matrix? And if you don’t pass the risk matrix, it is over; there is 

no further consideration. And then, they go through and they do 

an ability to pay analysis to comply with the Fed rule based on income and assets, and that will knock people out or reduce the line 

that might otherwise have been granted. 

So if you look at historic underwriting standards, what this does 

is it throws a consideration in that historically credit card issuers 

haven’t found terribly useful, but it occurs after the other considerations have occurred. So basically, all it does is deny people credit 

who probably are good credit risks. 

Chairwoman CAPITO. Thank you. Mr. Simme, as a retailer, what 

percent—you might have said this in your statement, and I apologize if you did—of your business is conducted on credit cards? 

Mr. SIMME. It is approximately 30 percent, Madam Chairwoman. 

The private label credit card, again, as was mentioned earlier, most 

customers start with basically a store card or a house card as their 

introduction to credit. And I follow Mr. Ireland’s comments, that 

we have used sophisticated credit scoring models for many, many 

years that look at things that don’t include income, things that 

may include the fact that you established a bank account or that 

you have been in your residence for an extended period of time. 

Since credit represents 30 percent of our sales, we are very, very 

concerned about the change that would impact a substantial portion of our continuing sales. 

Chairwoman CAPITO. Are the remainder of your sales cash and 

check? 

Mr. SIMME. I want to say about 15 to 20 percent are cash and 

the remainder are other forms of credit. So in our proprietary credit world, we are competing against the bank card market so that 

customers using proprietary credit allow us to make sure that we 

are keeping track of our customer’s purchases and really using our 

card base as a kind of communication source. 

Chairwoman CAPITO. In MomsRising, I am curious to know, Ms. 

Boyd, you mentioned some moms and dads—I am sure you have 

some dads in there who are stay-at-home dads. I am just curious 

to know, are you seeing a rising percentage of this getting involved 

with your group with the same kinds of issues that a stay-at-home 

mom— 

Ms. BOYD. I think one of the things that has been an interesting 

byproduct of the recession is that I have read that the ranks of 

stay-at-home dads are increasing, so that if there has been dual income earners, whoever keeps their jobs goes out in the workforce, 

and sometimes it is the dad who has lost their job and stays home 

with the kids. So it has been an issue that stay-at-home dads have 

been tracking. We don’t have—like I said, we generated 45,000 signatures. We don’t know the percentage of those who are moms or 

dads or those who have been directly impacted. But I think—I am 

happy to see the inclusive language of stay-at-home parents since 

stay-at-home dads are experiencing the same thing and are experiencing the same concerns about their credit. 

Chairwoman CAPITO. I think it is important for the whole— 

Ms. BOYD. Absolutely. 

22 

Chairwoman CAPITO. —breadth of the issue to make sure it 

does—women are in that group more, but more and more frequently, it is men as well. Mrs. Maloney? 

Mrs. MALONEY. First of all, I would like to thank all of the panelists for being here, particularly Ms. Boyd. I am one of your 1 million MomsRising, so I read your emails every day. And the 45,000 

signatures you got is pretty impressive. Can you give us a little 

history of it? When did you go online with it? That was one petition 

I didn’t sign. I must have had a heavy day that day. I didn’t read 

my email. And have you submitted your list to the CFPB? 

Ms. BOYD. Yes, we have. So we started—one of our members who 

is here today, Holly McCaul, actually— 

Mrs. MALONEY. Where is Holly? Thank you, Holly. Good work. 

Ms. BOYD. She actually wrote our general inbox and said that 

she had experienced this issue and was really surprised. She personally has an amazing credit score, one that we would all probably 

seek to have, and has a good income between she and her husband, 

but is a stay-at-home mom of two. And I remember getting the 

email from her. I was stunned to think that this would be impacting stay-at-home moms in this way. And I think for those of us who 

appreciate and value and have the experience of being stay-athome parents know what hard work it is. So it just felt like a slap 

in the face to me and millions of others. 

So we launched a petition in October—no, I guess it was in December of last year, and then went back out to our membership in 

February. It was in April that we partnered with Change.org, 

which also runs online petitions. So we have two complementary 

petitions, and together we have generated 45,000 comments. A couple of weeks ago, we did deliver our petitions to the CFPB and they 

were very generous and welcoming to us and appreciated our input. 

We had a brief meeting with Director Cordray and he thanked 

us for our efforts. And we pledged to help give them the data that 

they may need, although it may be anecdotal and not in the mass 

quantities that they had hoped for from the credit card industry. 

We did pledge to help them in any data gathering that they needed 

to assess the impact of this rule. 

Mrs. MALONEY. I think that is terrific. I would like a copy of your 

45,000 comments. 

Ms. BOYD. It is 12,000-plus here, to give you a sense. And I can 

give— 

Mrs. MALONEY. I would love it. I am going to be speaking on this 

later on at a caucus meeting so I could flash it around—45,000 is 

really, really, really, really impressive. 

Ms. BOYD. Thank you. 

Mrs. MALONEY. Good work. You have raised the issue to everyone’s attention, and it is an important issue, and it certainly was 

not the intent of the legislation. But since we have Mr. Simme 

here, I really want to know, how does the Fed’s formulation of the 

ability to pay rule work on consumers who are at a point-of-sale, 

and they are getting a credit card at one of your retail stores, how 

does it work? Can they get the credit card, the stay-at-home moms, 

or what is the process there? 

Mr. SIMME. The process is exacerbated by the fact that most of 

us have gone ahead and retrofitted all of our registers now to acVerDate Nov 24 2008 19:31 Oct 12, 2012 Jkt 076104 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 K:\DOCS\76104.TXT TERRIE
23 

cept the keying of income at point of sale. For example, Mr. Ireland 

had mentioned income traditionally, because we are issuing low 

credit lines. It really hasn’t necessarily been as predictive an indicator as the indicators I suggested earlier. So the problem is that 

retrofitting process obviously costs money, and obviously the discussion prior to when these laws get implemented here, there is a 

financial cost for retailers. We take our compliance responsibility 

seriously, and we want to be absolutely positively certain we do everything possible to comply in every way. So as a result of it, it 

definitely has had some impact on us. And quite frankly, it might 

be very hard to measure. Certain customers may just no longer 

apply thinking that they will be required to put income information 

into the process, therefore, it is almost more of a deterrent than 

anything else. It is very hard to measure. 

Mrs. MALONEY. As one who represents the retail capital of the 

world, Madison Avenue, which probably has more retailers than 

anyone, how would the retailers like to see this resolved, how 

would you like to see this resolved? 

Mr. SIMME. I think we would like to see it resolved by simply 

going back to the methodologies we have used in the past, using 

our tried and true credit scoring models. Again, most of us, including all the retailers in New York, use an automated instant credit 

process are probably processing 99 percent of their private label 

credit applications. 

Mrs. MALONEY. Since I have the microphone, I want to ask really 

an unrelated question but a very important one. In Dodd-Frank, 

one of the areas I worked on was the interchange fees where they 

were lowered for merchants when they accept debit cards. And it 

was said that the merchants would then, with the savings, provide 

it over to consumers. But I am hearing from consumers that they 

haven’t had any benefit from this. Could you just comment on that 

and how the interchange fee is working and any comments that 

you have? And consumers haven’t seen the savings that they said 

they would get from the retailers. If you could comment? 

Mr. SIMME. Certainly, we finally have the option now to give 

back discounts to customers where it was not permitted in the past 

if the customer used a debit card. And a lot of us are in the process 

right now of looking at that technique of figuring out within the 

networking environment how we can basically now re-route transactions over different networks to save money. And I will say that 

we have seen substantial and new benefits in terms of the reduction of the Act so far. 

Retail is a competitive business. We provide basically benefits 

back in terms of lowering our merchandise retail prices to our customers, and as an offset, we did experience increases in our commodity prices, especially with cotton prices this past year. But as 

a result of other savings, for example, debit cards, we are able to 

continue to lower our prices to our consumers. 

So I think you will find the retailers provide benefits back to customers in different ways, whether it is extended services, for others, or basically by lowering fees in other areas. But I think that 

overall, we were certainly in a much better position than we were 

last year. We appreciate your support and your efforts, and we 

were very happy with the outcome. 

24 

Mrs. MALONEY. My time has expired, but I just wanted to thank 

Mr. Ireland for his incredibly thoughtful presentation. Thank you 

very much. I wish I had time for a question. Anyway, I yield back. 

Chairwoman CAPITO. Mr. Renacci for 5 minutes. 

Mr. RENACCI. Thank you, Madam Chairwoman. I want to thank 

all of you also for being here. I do have some serious concerns with 

this final rule and its effect on stay-at-home moms and dads and 

really military families too. Ms. Boyd, you talked about the 45,000 

signatures that you submitted, and that is great work. And you 

also said that you met with Mr. Cordray. I just wanted to find out, 

did you feel you got information back, and do you have a comfort 

level that at least they are looking at it and your concerns are 

being addressed? 

Ms. BOYD. Yes. Thank you for the question. Absolutely. They 

were very gracious. And Mr. Cordray, Dr. Cordray, thanked us for 

our work and for being active on the issue and said how helpful 

that was to him and his work. So yes, I felt that they listened to 

us and our concerns. And the representative here today pledged to 

look into it, and we felt like that was very earnest and genuine. 

Mr. RENACCI. Did they give you an idea when they would get 

back to you with some of your concerns? 

Ms. BOYD. A similar timeframe of this summer. So I think there 

is some consistency there. But I felt like they also expressed that 

the public concern, and certainly your legislative concern on this 

matter had raised the visibility of this issue within the Bureau, 

and they were taking that very seriously. 

Mr. RENACCI. Thank you. Mr. Ireland, the Equal Opportunity Act 

was originally enacted to ensure that women would gain access to 

credit, access that was generally unavailable at the time of the 

ECOA’s enactment, especially for women who did not have significant independent assets. Do you believe that the Fed’s ability to 

pay rule discriminates against certain credit applicants on the 

basis of their gender or marital status? 

Mr. IRELAND. I believe it has that effect, yes. And I believe there 

is—if you look at the demographic information in my written testimony from consensus data, we tried to illustrate how that effect is 

likely taking place. 

Mr. RENACCI. So you would say that it is in direct relationship 

to the Equal Credit Opportunity Act, it is actually totally against 

it, I assume? 

Mr. IRELAND. I was stunned. 

Mr. RENACCI. Mr. Simme, and again, this goes back to really 

elaborating on how it pertains to your stores, in your testimony, 

you state that the Board’s interpretation of the law has the potential to undo beneficial aspects of the Equal Credit Opportunity Act. 

Can you kind of elaborate on that claim and how it really pertains 

to your stores, how will it affect your stores? 

Mr. SIMME. Again, I go back to the notion that one-sixth of all 

of our customers, for the most part, are stay-at-home moms. And 

the fact that if the rule, the way it is written, continues to reduce 

the number of customers who apply for credit, obviously, that has 

an adverse effect on our ability to issue new credit. 

Mr. RENACCI. Ms. Boyd, are you doing any additional things now 

that after you have been able to submit, are there any further 

25 

things that your group is doing? I am very interested in all the 

work you have done already. 

Ms. BOYD. Thank you for the question. Being here is an important step in our work, and I appreciate again the chance to testify 

on behalf of our members. We will be continuing to publish information about the rule and we will be awaiting the CFPB’s action. 

So essentially, we are keeping those who signed the petition up-todate about any changes or progress and so we will be hanging 

tight, I think, for the summer. 

Mr. RENACCI. Thank you. I yield back. 

Chairwoman CAPITO. All right. I think that will conclude our 

hearing. Before I conclude the hearing, I would like unanimous 

consent to insert into the record a statement from the U.S. Chamber of Commerce. 

Without objection, it is so ordered. 

Mrs. MALONEY. Madam Chairwoman, may I ask unanimous consent to enter into the record a statement from Representative Louise Slaughter, who worked very closely with me on this bill, particularly in the area for stay-at-home moms. 

Chairwoman CAPITO. Without objection, it is so ordered. 

The Chair notes that some Members may have additional questions for this panel, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 30 days 

for Members to submit written questions to these witnesses and to 

place their responses in the record. 

I appreciate you all coming, and I appreciate your patience as 

well for the in-and-out, and with that, this hearing is adjourned. 

[Whereupon, at 3:39 p.m., the hearing was adjourned.] 

(27) 

A P P E N D I X 

June 6, 2012 

28 


76104.001
29 


76104.002
30 


76104.003
31 


76104.004
32 


76104.005
33 


76104.006
34 


76104.007
35 


76104.008
36 


76104.009
37 


76104.010
38 


76104.011
39 


76104.012
40 


76104.013
41 


76104.014
42 


76104.015
43 


76104.016
44 


76104.017
45 


76104.018
46 


76104.019
47 


76104.020
48 


76104.021
49 


76104.022
50 


76104.023
51 


76104.024
52 


76104.025
53 


76104.026
54 


76104.027
55 


76104.028
56 


76104.029
57 


76104.030
58 


76104.031
59 


76104.032
60 


76104.033
61 


76104.034
62 


76104.035
63 


76104.036
64 


76104.037
65 


76104.038
66 


76104.039
67 


76104.040
68 


76104.041
69 


76104.042
70 


76104.043
71 


76104.044
72 


76104.045
73 


76104.046
74 


76104.047
75 


76104.048