(a) General rule.
(1) (i) Consideration of ability to pay. A card
issuer must not open a credit card account for a consumer under an
open-end (not home-secured) consumer credit plan, or increase any
credit limit applicable to such account, unless the card issuer considers
the consumer’s independent ability to make the required minimum periodic
payments under the terms of the account based on the consumer’s income
or assets and current obligations.
(ii) Reasonable
policies and procedures. Card issuers must establish and maintain
reasonable written policies and procedures to consider a consumer’s
independent income or assets and current obligations. Reasonable policies
and procedures to consider a consumer’s independent ability to make
the required payments include the consideration of at least one of
the following: The ratio of debt obligations to income; the ratio
of debt obligations to assets; or the income the consumer will have
after paying debt obligations. It would be unreasonable for a card
issuer to not review any information about a consumer’s income, assets,
or current obligations, or to issue a credit card to a consumer who
does not have any independent income or assets.
(2) Minimum periodic payments.
(i) Reasonable method. For purposes of paragraph (a)(1) of this
section, a card issuer must use a reasonable method for estimating
the minimum periodic payments the consumer would be required to pay
under the terms of the account.
(ii) Safe
harbor. A card issuer complies with paragraph (a)(2)(i) of this
section if it estimates required minimum periodic payments using the
following method:
(A) The card issuer assumes utilization, from
the first day of the billing cycle, of the full credit line that the
issuer is considering offering to the consumer; and
(B) The card issuer uses a minimum payment
formula employed by the issuer for the product the issuer is considering
offering to the consumer or, in the case of an existing account, the
minimum payment formula that currently applies to that account, provided
that:
(1) If the applicable
minimum payment formula includes interest charges, the card issuer
estimates those charges using an interest rate that the issuer is
considering offering to the consumer for purchases or, in the case
of an existing account, the interest rate that currently applies to
purchases; and
(2) If the applicable minimum payment formula includes mandatory fees,
the card issuer must assume that such fees have been charged to the account.
(b) Rules affecting young consumers.
(1) Applications from young consumers. A card issuer may not open
a credit card account under an open-end (not home- secured) consumer
credit plan for a consumer less than 21 years old, unless the consumer
has submitted a written application and the card issuer has:
(i) Financial
information indicating the consumer has an independent ability to
make the required minimum periodic payments on the proposed extension
of credit in connection with the account, consistent with paragraph
(a) of this section; or
(ii) (A) A signed agreement of a cosigner,
guarantor, or joint applicant who is at least 21 years old to be either
secondarily liable for any debt on the account incurred by the consumer
before the consumer has attained the age of 21 or jointly liable with
the consumer for any debt on the account, and
(B) Financial information indicating such
cosigner, guarantor, or joint applicant has the independent ability
to make the required minimum periodic payments on such debts, consistent
with paragraph (a) of this section.
(2) Credit line increases for young consumers. If a credit card account has been opened pursuant to paragraph (b)(1)(ii)
of this section, no increase in the credit limit may be made on such
account before the consumer attains the age of 21 unless the cosigner,
guarantor, or joint accountholder who assumed liability at account
opening agrees in writing to assume liability on the increase.
