According to a Supreme Court amicus brief filed last month by the Consumer Financial Protection Bureau, consumers who are required to guarantee their spouses’ credit applications are themselves credit applicants who are protected from discrimination under the Equal Credit Opportunity Act and Regulation B.
The CFPB claims that courts should defer to Regulation B’s “reasonable” definition of “applicant” which says that they are guarantors for purposes of the ECOA restriction on discriminating against marital status. The CFPB’s opinion is contrary to a recent decision from the Eighth Circuit in Hawkins v. Community Bank of Raymore, which the CFPB argues should be reversed by the High Court.
In Hawkins, the plaintiffs complained that the Community Bank of Raymore mandated that they personally guarantee their husbands’ business loans. After their husbands defaulted and the bank demanded payment from the plaintiffs, they sued the bank claiming violations of ECOA and Regulation B based on the guarantee. ECOA prohibits lenders from mandating that an applicant’s spouse join in a credit application as part of its prohibition on discrimination of any credit applicant on the basis of marital status. See 15 U.S.C. § 1691d. Regulation B, as implemented by the Federal Reserve Board and the CFPB, extends that prohibition to both credit applications and credit guarantees. See 12 CFR 1002.7(d).
In its contrary opinion, the Eighth Circuit rejected the CFPB’s attempt to broaden ECOA’s protections to credit guarantees. It found that ECOA unambiguously defined a guarantor as not an applicant; thus, a regulatory expansion of the definition of “applicant” was not a reasonable interpretation of ECOA. The Seventh Circuit has agreed. See Moran Foods, Inc. v. Mid-Atlantic Mkt. Dev. Co.
The CFPB, in its amicus brief, argued that “applicant” was not unambiguously defined by ECOA, only stating that an applicant is one who “applies for credit.” The CFPB contends that a guarantor, therefore, falls under the definition because he or she asks for credit to be extended to the primary borrower. The Sixth Circuit has agreed with the CFPB’s position. See In RL BB Acquisition, LLC v. Bridgemill Commons Development Group, LLC.