My credit card company is asking for my current income citing "Federal Regulations"

Question

So I received an e-mail today from a bank from whom I have an existing credit card as follows:

To consider you for a future credit line increase, federal regulations require us to have your current income.

Keeping your account info up to date is always a good idea. Plus, it helps us meet federal regulations, which require us to collect updated income info before reviewing your account for future credit line increases. So please take a moment and update your income in about 60 seconds.

As far as I can tell, the email is legit because it includes security information in the e-mail that checks out. Of course, I still am not following any links in that e-mail just in case.

Does anyone here know what the backstory is on this? Was there recent regulation passed where card issuers need to know your income level?

Or maybe I'm wrong and this is just a phishing attempt?

Answer 1

I received exactly the same letter (in email form) from Discover Card about 9 months ago, so I immediately called them, thinking that someone was doing some very convincing phishing -- the email had zero suspicious headers, the mail relays looked right, the stylesheets looked exactly like Discover Card's, etc.

Once I got a knowledgeable rep on the phone, she said Discover Card did indeed send the email. She explained that the sentence means "federal regulations allow us to grant you a credit increase (without performing a credit check) based solely on your statement of your income", and therefore they're happy to store your stated income within your account profile in case they ever want to adjust your credit line in the future.

Now, this of course seems ridiculous to me, because creditors have always had complete freedom to adjust your credit line up or down as much or as little as they want without doing credit pulls. (I know this from first-hand experience when Citibank cut my credit line by 85% without doing a credit pull.)

I think what must have happened is that some federal law was passed (or maybe expired) last year such that now card issuers are allowed to ask/store/use their customers' income information, so they figure "hey, let's try to get as many customers as possible to volunteer this information, first by sending a letter that kinda makes it sound like they have to tell us, and then by telling them it can possibly benefit them in the future".

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UPDATE

Three months after I posted this answer (i.e. during the holiday shopping season), there was an interesting new development in my case that I think might be relevant. Out of the blue Discover sent me a letter saying I might qualify for a credit line increase. All I had to do was go to a page on the Discover site and answer two questions: 1) my yearly income, 2) my monthly housing expense.

So I went to the page and filled in the same number for (1) that I gave to the phone rep many months earlier -- a number, it should be said, that Discover has no way of verifying. When I was done, the site instantly reported that I was eligible for up to a 20% credit line increase. I was taken to a page with a slider bar where I could select the exact amount of the increase that I wanted. I picked the maximum (I'm not sure why anyone wouldn't), and it was instantly approved. There was no accompanying change in terms, APR, anything.

Two points:

(a) I have only a "good" credit score (not nearly an "excellent" score), so I have not been offered a credit line increase by anyone in quite a long time. (On the other hand, I have been a Discover cardmember for ~20 years and have never missed a payment or carried a balance with them. Additionally, I rarely "double" my cashback with them; I usually just take the credit against my balance.)

(b) I have had my credit reports "frozen" for almost four years to help prevent identity theft, so Discover could not have pulled my credit before making this offer. (Naturally they have their own internal data on me and can generate their own internal quasi-FICO scores.)

So ... the moral of the story would appear to be that by my responding to their initial inquiry a year ago and giving a number (which, again, they had no way of verifying) for my annual income, I was eventually given a substantial credit line increase (around the time of year when Discover probably thought I would make use of it) despite my merely average credit score.

YMMV!

Answer 2

I recommend you take a look at the Card Act of 2009's amended "ability to pay" regulations: http://files.consumerfinance.gov/f/201304_cfpb_credit-card-ability-to-pay-final-rule.pdf

There's a lot of literature here, mostly discussing the recent changes to the rules. The highlights are: "Ability to Pay" rules differ based on whether or not the consumer is age 21 or older (these rules have gotten more strict since the original law). There also is allowance for a consumer to consider outside income to which they have a "reasonable expectation of access" to count toward their own ability to pay.

But I direct you to this paragraph near the end of page 5:

On March 18, 2011, the Board issued a final rule (March 2011 Final Rule) amending § 226.51(a) to apply the independent ability-to-pay requirement to all consumers, regardless of age.

The Board adopted this change, in part, in response to concerns regarding card issuers prompting applicants to provide “household income” on credit card applications. To address this specific concern, in addition to adopting an independent ability-to-pay requirement for consumers who are age 21 and older, the Board clarified in amended comment 51(a)(1)-4.iii that consideration of information regarding a consumer’s household income does not by itself satisfy the requirement in § 226.51(a) to consider the consumer’s independent ability to pay. The Board stated that in its view it would be inconsistent with the language and intent of TILA section 150 to permit card issuers to establish a consumer’s ability to pay based on the income or assets of individuals who are not responsible for making payments on the account The Board’s amendments to § 226.51 became effective on October 1, 2011.

Answer 3

I also received the same request in an email. I called Discover and they told me that they were required to send that out. I am assuming that they are required to send it out in order to adjust our line of credit, but they would not confirm that. They also said that it was optional for us to respond to that request. In other words, we don't have to update our income if we don't want to.