(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 ability to make the required minimum periodic payments
under the terms of the account based on the consumer’s income or assets
and the consumer’s current obligations.
(ii) Reasonable
policies and procedures. Card issuers must establish and maintain
reasonable written policies and procedures to consider the consumer’s
ability to make the required minimum payments under the terms of the
account based on a consumer’s income or assets and a consumer’s current
obligations. Reasonable policies and procedures include treating any
income and assets to which the consumer has a reasonable expectation
of access as the consumer’s income or assets, or limiting consideration
of the consumer’s income or assets to the consumer’s independent income
and assets. Reasonable policies and procedures also include 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 not to review any information about a consumer’s
income or assets and current obligations, or to issue a credit card
to a consumer who does not have any 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; 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 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.
(i) If a credit card account has been
opened pursuant to paragraph (b)(1)(i) of this section, no increase
in the credit limit may be made on such account before the consumer
attains the age of 21 unless:
(A) At the time of the contemplated
increase, the consumer has an independent ability to make the required
minimum periodic payments on the increased limit consistent with paragraph
(b)(1)(i) of this section; or
(B) A cosigner, guarantor, or joint applicant who is at least 21
years old agrees in writing to assume liability for any debt incurred
on the account, consistent with paragraph (b)(1)(ii) of this section.
(ii)
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.
