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Is the Fed’s New Credit Card Rule Sexist?

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The Federal Reserve says it’s trying to protect consumers from credit card scams. But feminist groups, some retailers and consumer advocates say the government’s credit card proposal is sexist, and threatens to return women to the kind of financial subservience many experienced four decades ago.

“It’s just outrageous,” Eleanor Smeal who led the National Organization for Women (NOW) campaign to pass credit legislation to empower women in 1975, says of the Fed’s proposal. “This would be going backwards.”

The disagreement concerns the Truth in Lending Act’s Regulation Z. When Congress passed the Credit Card Act of 2009, it instructed the Fed to write rules limiting credit card companies’ ability to market cards to college students who don’t have the income to repay what they charge.

The Fed responded with a proposal that would require credit card companies to check an applicant’s independent income – money earned outside the home – before approving a new credit card or increasing the credit limit on an existing card.

That could make it harder for some people, especially stay-at-home moms, to apply for in-store credit cards. Retailers have worked hard in recent years to push such in-store applications in recent years because the cards drive up customer loyalty and earn retailers revenue from credit card fees. (Which is why so many clerks pester you at the checkout counter about whether you want a store credit card.)

Consumer advocates say the Fed is going too far.

“(T)he proposals would resurrect barriers to credit for married women that Congress abolished almost forty years ago,” Anne P. Fortney and Jean Noonan, partners in Hudson Cook LLP, a law firm that specializes in consumer protection, wrote in a letter to the Federal Reserve.

Some retailers are fighting the Fed’s proposal. It “would have a chilling effect on the willingness of customers to apply for store credit because of the embarrassment of being denied credit at the point-of-sale, and the possibility of being told by a store clerk in front of other customers that she must have a co signer for the account,” according to a letter to the Fed by Philip C. Galbo, a lawyer for David’s Bridal.

Credit card companies are against it, too.

“By preventing a non- or low-earning spouse from using household income to open an account, the proposed amendments would place this spouse in a subservient role,” Carl V. Howard, a lawyer for Citibank, told the Fed in a letter.

The Fed declined to answer questions about the proposal. The public comment period on the proposal has ended. The Fed will announce its final rule in the coming months.

Some feminist leaders were surprised by the proposal. Smeal, a former president of NOW and currently the president of the Feminist Majority Foundation, hadn’t heard about the Fed’s action until a reporter called to get her response.

She said that if enacted, the new rule could place women back where they were prior to passage of the 1974 Equal Credit Opportunity Act.

“A wife was not considered to have any money, and a woman couldn’t have credit based on her credit history,” Smeal says. “It was a major goal that women could get credit on their own. This is not good for us.”

Note: This article was revised March 23, 2011 to correct an error stating that the new rule would place women back where they were prior to passage of the 1975 Credit Card Act. It should be the 1974 Equal Credit Opportunity Act.

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