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House Hearing Will Scrutinize CARD Act’s Ability to Repay Provision


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While I think the act as written is too restrictive, I think going back to the old ambiguous "household income" isn't the right move either. I think the law should read that you can only consider income that you report on your tax return (therefore if you file MFJ you can include your spouse). You could also claim the other income sources (alimony, etc) in the other income section.

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While I think the act as written is too restrictive, I think going back to the old ambiguous "household income" isn't the right move either. I think the law should read that you can only consider income that you report on your tax return (therefore if you file MFJ you can include your spouse). You could also claim the other income sources (alimony, etc) in the other income section.

 

I like the tax return idea, especially for non CP states. I suppose there are some people, however, who while married do not file jointly.

 

also, a 1040 does not help people who live on a 10,000,000 nest age and no longer work.

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I personally would welcome a change back to the old ways, what borrower wouldn't?... but I'm not the one taking the risk. I believe they should leave it up to the lenders to determine if they want to use HHI or not, based on their own risk models.

 

On the flip side, I think the problem is that lenders have proven their inability to self-regulate effectively so this is the govt stepping in to what should be a risk assessment. (I'm not trying to get political - just explaining why they probably won't allow banks to decide).

 

I think if anything, we need better clarification on how this should be handled and if it is actually regulated (and how). From what I've read here and elsewhere there are still a lot of people putting down HHI and some banks don't seem to really care. Is this just a CYA in case they need intervention again in the future?

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The whole "household income" thing started from an earlier law that was intended to help stay-at-home spouses establish credit in their own name. That access to credit would often prove very valuable in case of a breakup. Hopefully Congress will consider this issue.

Edited by mk_378
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The whole "household income" thing started from an earlier law that was intended to help stay-at-home spouses establish credit in their own name. That access to credit would often prove very valuable in case of a breakup. Hopefully Congress will consider this issue.

 

The issue is when people start counting grandma's social security check, or teenagers counting their parents income into their "income" as a basis to repay their obligations just because they live in the same "household" even though they may have no access to those funds...

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While I think the act as written is too restrictive, I think going back to the old ambiguous "household income" isn't the right move either. I think the law should read that you can only consider income that you report on your tax return (therefore if you file MFJ you can include your spouse). You could also claim the other income sources (alimony, etc) in the other income section.

 

 

also, a 1040 does not help people who live on a 10,000,000 nest age and no longer work.

 

But how is this any different than prior to the new legislation? Also, if you have that type of nest egg, more than likely you would be earning interest that is taxable and/or drawing distributions that while they may not be taxable, would still be reported, or creating gains/losses on the sale of assets.

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i would have to agree that the new restrictions are too tight. we need laws that are more progressive. allowing spousal income claims would ultimately be discriminatory against non-married couples. it makes no sense to allow married couples to share income when there is no guarantee of shared responsibility for the resulting credit. in many ways a married couple is no different than an unmarried couple when it comes to credit responsibility.

 

something in between would be ideal, allowing a household income as long as it was from pooled resources. which i think was the intention of allowing household income, there was just no force behind it, and thus it was taken advantage of.

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Personally.. I think it should be HHI, but even then it has it's problems.

 

I currently am married, but my marriage isn't viewed as a 'marriage' by the IRS. (so the whole MFJ vs MFS doesn't help)

 

Even though we have 2 incomes, and both of us are paying on the debts, is it right to deny credit to one of us just because we cannot use BOTH our incomes to pay it back? In reality, that is how it gets paid.

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Personally.. I think it should be HHI, but even then it has it's problems.

 

I currently am married, but my marriage isn't viewed as a 'marriage' by the IRS. (so the whole MFJ vs MFS doesn't help)

 

Even though we have 2 incomes, and both of us are paying on the debts, is it right to deny credit to one of us just because we cannot use BOTH our incomes to pay it back? In reality, that is how it gets paid.

 

I don't want this topic going down the rathole of what defines a marriage, as it will inevitably get political and very heated (and quickly closed)

 

My opinion would be that if you file MFJ you can use your spouses income, otherwise your income only. If you are choosing to be separate for tax purposes, you choose to be separate for this purpose (yes I know there are reasons ppl file MFS even though they may contribute 50/50 to expenses). This keeps it abundantly clear and simple. As for those that are not in "traditional" marriages, maybe make the rule that if your state recognizes marriage, and allows you to file as married (as you can here in CT) , you can use spousal income. I don't think there is any solution that is going to be 100% fair to both the banks and the variety of domestic situations in this country.

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something in between would be ideal, allowing a household income as long as it was from pooled resources. which i think was the intention of allowing household income, there was just no force behind it, and thus it was taken advantage of.

 

Herein lies the problem, what defines "pooled" and how do you enforce it... :dntknw:

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Personally.. I think it should be HHI, but even then it has it's problems.

 

I currently am married, but my marriage isn't viewed as a 'marriage' by the IRS. (so the whole MFJ vs MFS doesn't help)

 

Even though we have 2 incomes, and both of us are paying on the debts, is it right to deny credit to one of us just because we cannot use BOTH our incomes to pay it back? In reality, that is how it gets paid.

 

 

This is a good example of where greater use of joint CC accounts makes sense. This is pretty much the de facto in community property states since virtually always one party's income or debt are community income/debt. Since one spouse automatically encumbers the other when opening an account, requiring a joint app in community property states would solve the problem that currently exists where one party can run up debt unbeknownst to the other party.

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Personally.. I think it should be HHI, but even then it has it's problems.

 

I currently am married, but my marriage isn't viewed as a 'marriage' by the IRS. (so the whole MFJ vs MFS doesn't help)

 

Even though we have 2 incomes, and both of us are paying on the debts, is it right to deny credit to one of us just because we cannot use BOTH our incomes to pay it back? In reality, that is how it gets paid.

 

 

This is a good example of where greater use of joint CC accounts makes sense. This is pretty much the de facto in community property states since virtually always one party's income or debt are community income/debt. Since one spouse automatically encumbers the other when opening an account, requiring a joint app in community property states would solve the problem that currently exists where one party can run up debt unbeknownst to the other party.

I'm not too sure how that would work. Should they be made to close their individual accounts when they marry?

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http://www.jdsupra.c...5d-73303e79a2a2

In particular, she indicated that doing a debt-to-asset analysis rather than a debt-to-income analysis might be the way to go. Ms. Hillebrand observed that the Commentary to the current Reg. Z rule allows a card issuer to take into account "assets such as savings accounts" when considering the income and assets of the person who will be liable for the card. She also observed that while "the Commentary does not specifically address joint accounts or checking accounts," the CFPB is "considering options for providing guidance" that would allow a card issuer to consider such accounts as part of an applicant's assets or "other situations in which money earned by one person is managed or controlled jointly with another and thus should be available to both individuals of qualifying credit."

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I've heard recently that income models are being scrutinized and may no longer be allowed for N.A. banks. I sure hope this does not lead to hard verification of income unless HHI can be used.

 

Hege,

 

Where did you hear this and why would it only apply to N.A. banks? Are they thinking of removing "stated income" as well or only "modeling?"

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I would suppose that this is going to end up as a states right issue regarding community property and household expenses expenses laws.

 

 

 

this is typcial in Colorado and a few other states

 

C.R.S. § 14-6-110 provides that the expenses of the family are chargeable upon property of both husband and wife, or either of them, and in relation thereto they may be sued jointly or separately.

 

 

So regardless of who used a CC - if it was used to household expenses, they can charge either spouse.

 

 

and if either spouse is liable, why can't you use household income to apply?

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I would suppose that this is going to end up as a states right issue regarding community property and household expenses expenses laws.

 

 

 

this is typcial in Colorado and a few other states

 

C.R.S. § 14-6-110 provides that the expenses of the family are chargeable upon property of both husband and wife, or either of them, and in relation thereto they may be sued jointly or separately.

 

 

So regardless of who used a CC - if it was used to household expenses, they can charge either spouse.

 

 

and if either spouse is liable, why can't you use household income to apply?

 

This is why I think it is fine to use household income in community property states. At least for spouses.

 

It's also why I believe spouses in community property states should endeaver to get jouint CCs and fully disclose to each other any individual debts they have since both are on the hook for the debts and income becomes the property of both automatically.

Edited by cashnocredit
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I would suppose that this is going to end up as a states right issue regarding community property and household expenses expenses laws.

 

 

 

this is typcial in Colorado and a few other states

 

C.R.S. § 14-6-110 provides that the expenses of the family are chargeable upon property of both husband and wife, or either of them, and in relation thereto they may be sued jointly or separately.

 

 

So regardless of who used a CC - if it was used to household expenses, they can charge either spouse.

 

 

and if either spouse is liable, why can't you use household income to apply?

 

This is why I think it is fine to use household income in community property states. At least for spouses.

 

It's also why I believe spouses in community property states should endeaver to get jouint CCs and fully disclose to each other any individual debts they have since both are on the hook for the debts and income becomes the property of both automatically.

 

debts before marriage don't count , and a new spouse won't be on the hook for it.

 

However if you're planning on getting married, everyone needs to honest about thier background, including finances.

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