January 29, 2010

With less than one month before provisions of the Credit Card Act go into effect on February 22, financial services firms need to finalize their internal processes to ensure they comply with the rules released by the Federal Reserve. TransUnion said today that its two income models — Income Estimator and Debt-to-Income Estimator — predict a consumer's ability to pay as required under the Fed rule.

The staff interpretation of the final rule states that card issuers may use "empirically derived, demonstrably and statistically sound models that reasonably estimate a consumer's income or assets" to assess a consumer's ability to pay. The rule itself states that "reasonable policies and procedures to consider a consumer's ability to make the required payments include a 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."

When considering a consumer's income or assets and current debt obligations, a creditor is permitted to rely on information provided by the consumer or information in a consumer's credit report. Trans Union says its Income Estimator solution can help financial service firms estimate income when income is not supplied by the consumer and validate consumer-supplied data and previously captured consumer income.

A card issuer also may consider the consumer's current obligations based on information provided by the consumer or in a consumer report. The credit bureau's Debt-to-Income Estimator provides an estimate of the ratio of debt obligations to income, and can be utilized to consider a consumer's ability to make required payments.

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