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October 07, 2013

Comments

DJ

Please clarify the portion within the section "Responsible access to credit remains available," that reads - "Now that consumers have to ask for their credit limit to be raised rather than having it happen automatically, these increases are happening less frequently." . . .
There is not a prohibition to increase credit limits. However, there is section 1026.51 Ability to Pay that requires an issuer to consider the consumer's ability to make required minimum payments. CFPB's report (pg 57) reads, ". . . part of the reason that issuers have been cautious about proactively implementing credit line
increases is that they have been uncertain about how to apply the CARD Act ability-to-pay requirements."
Thank you!

JiJi Bahhur

DJ,

I, too, am not aware of a federal prohibition on proactively increasing a member’s credit card limits as long as the credit union considers the member’s ability to pay in accordance with section 1026.51. The quoted material you point to sounds like a vague – and confusing – reference to the ability to pay requirements in Regulation Z.

Here is an excerpt from page 58 of the report, discussing credit line increases in more detail:

“The incidence rate of CLI fell significantly after the financial crisis, bottoming out in Q2 of 2010. Since then the incidence rate of CLI has increased but is still 34.7% of its Q2 2008 level. The ability-to-pay requirement may play a role in fewer incidents of credit line increases as issuers are now required to include some consideration of the consumer’s income in evaluating the consumer’s ability to pay. The CFPB is actively engaged in understanding the impact on consumers of the reduced incidence rate of CLI.”

Dugan & Lopatka

Interesting to note the changes you have listed here. Sometimes it feels like the opposite is true, but everything is relative.

DJ

I wrote a little too quickly in my last post. I apologize for the lack of clarity in thought. I'll try again. My thought/question is in regard to the statement that "Now that consumers have to ask for their credit limit to be raised rather than having it happen automatically . . . "
This statement was (for me, at least) misleading. My understanding is that consumers do not, necessarily, have to request a credit limit increase. Issuers still have the flexibility to increase credit limits without a consumer request - as long as the Ability to Repay and, also, the Limitations on increasing annual percentage rates, fees, and charges are considered.

JiJi Bahhur

I agree with your understanding, as I have not come across anything in the regulation that requires the consumer to ask for the limit increase. If I come across something to the contrary, I'll be sure to share.

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