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What happened when secondary earners were allowed to apply for credit based on household income as a result of the 2013 TILA reversal? This implies secondary earners consumed 69 cents for every dollar consumed by primary earners prior to the TILA reversal.įigure 1: There were large gaps between spouses in access to credit and consumption prior to the TILA reversal. There were large gaps in consumption within the household: Before the TILA reversal, primary earners consumed 59% and secondary earners 41% of total monthly household consumption, indicating the average consumption gap between spouses of 18%.The gap in independent credit access between spouses is even larger (72%), suggesting secondary earners were much less likely than primary earners to be able to borrow independently from credit markets prior to the TILA reversal. 4 This implies prior to November 2013, secondary earners could borrow 30 cents for every dollar primary earners could borrow. There were large gaps in credit access between spouses (Figure 1): Before the TILA reversal, primary earners had access to 97% and secondary earners or stay-at-home spouses (henceforth, “secondary earners”) 29% of total available credit limits at the household-level, indicating the average credit gap between spouses was 68%.Inequalities between spouses in access to credit and consumption prior to the TILA reversal How did spouses differ in their access to credit and consumption patterns prior to November 2013, and did the TILA reversal changes those patterns?
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The statute was reversed in November 2013 to allow credit card issuers to consider household income, facilitating access to credit for secondary earners and stay-at-home spouses. This independent income requirement raised concerns that credit access for secondary earners or stay-at-home spouses may be restricted because these spouses had access to household income but had limited income of their own. consumer credit card market - required credit card issuers to evaluate applicants’ independent (i.e., individual) income in their lending decisions. Before November 2013, TILA Section 150 – which imposes ability-to-pay requirements in the U.S.
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3 The research evaluates the impact of the 2013 reversal of the Truth-in-Lending-Act (TILA) on these intra-household inequalities.
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This research brief summarizes results published by Kim (2021), which uses de-identified JPMorgan Chase financial accounts data to document gaps between spouses in credit access and consumption. However, the role of access to credit within a marriage has been understudied, and we know little about the extent and implications of credit disparities between spouses. 1 For married couples with a single household income–roughly half of married couples with at least one child 2– breadwinners likely have higher borrowing capacity than their spouses, because income determines at least part of one’s ability to borrow. Survey evidence shows that perceived financial inequity between spouses is among the top predictors of divorce in the U.S. But is credit shared equally between spouses? There are reasons to believe that disparities in credit persist within a marriage. Promoting equal access to consumer credit has long been a policy goal in the United States.