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Divorce and access to credit: new rule on CARD Act

It's no secret that the financial challenges of divorce can hit women harder than men. To be sure, this is supposed to be an age of gender equity. But the reality, in Illinois and elsewhere across the U.S., is that wives are often more financially dependent on husbands than vice versa.

Still, there are steps that women (and men as well) can take during the divorce process to move forward financially. One of them concerns establishing credit in their own name.

In that regard, a new rule to implement a federal law known as the CARD Act has a bit of help to offer. CARD Act is shorthand for Credit Card Accountability, Responsibility, and Disclosure Act.

Congress passed the law in 2009. One of the goals was to prevent college students from taking on excessive credit card debt at such an early stage of their lives. One section of the CARD Act therefore sought to end the practice of getting credit cards based on family income when that income was not one the card applicant earned.

In practice, this provision of the law did not only affect students. It also affected stay-at-home spouses who had not established credit in their own names. Gender dynamics being what they are in America today, more of these spouses were women than men. As a result, the CARD Act made it more difficult for stay-at-home spouses, especially women, to get access to credit after divorce.

Fortunately, a new federal rule concerning the implementation of the CARD Act will go into effect later this year. Under the new rule, credit card companies can consider financial assets or income of a spouse or partner under certain circumstances. The credit applicant must be at least 21 and reasonably expect to have access to the spouse or partner's income and assets. The rule was issued by the Consumer Financial Protection Bureau (CFPB).

Thanks to the CFPB's action, many stay-at-home parents, including millions of moms, will be better able to build credit histories of their own. And those histories will benefit them in rebuilding credit after divorce.

Source: "Good News For Divorcing Women: Credit Reform, Reformed," Forbes, Jeff Landers, May 7, 2013

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