Thus, banks should be aware that they might not be able to collect the underlying debt from the spouse-guarantor, if they violate the ECOA or Regulation B.A newly effective CFPB Interpretive Rule expands the scope of the Equal Credit Opportunity Act (ECOA) and Regulation B to encompass sexual orientation discrimination and gender identity discrimination. In addition, if the creditor brings a collection lawsuit against the spouse-guarantor, the spouse-guarantor can assert the ECOA and Regulation B violation as an affirmative defense. If a creditor violates this rule, the spouse-guarantor can independently file a lawsuit for the violation.
The Sixth Circuit Court joined the First and Third Circuit in holding that ECOA violations can be raised as a defense of collection.ĮCOA and Regulation B prohibit creditors from requiring a spouse to serve as a guarantor. The Court held that the violation of ECOA and Regulation B can serve as an affirmative defense. The wife asserted that her guaranty was unenforceable since the creditor violated the ECOA and Regulation B by requiring that she guarantee her husband’s loan. When the borrower defaulted on payment, the creditor brought an action against the wife for breach of guaranty.
In the Sixth Circuit case, the wife of the applicant served as a guarantor of the loan. In addition, as held in the Sixth Circuit Court of Appeals, the guarantor can assert violations of the statute and Regulation B as an affirmative defense in an action to recover on the underlying debt. Spouse-guarantor can also assert the violation as affirmative defense in a collection suit. Therefore, a spouse-guarantor can sue a creditor for violating the ECOA and Regulation B if the creditor requires the spouse to guarantee a loan.Ĭ. The Sixth Circuit Court of Appeals ruled that “applicant,” for the purposes of enforcing the ban of requiring spousal guarantees, includes a spouse-guarantor.
However, Regulation B, which implements the ECOA, says “applicant,” for the purposes of enforcing the ban of requiring spousal guarantees, includes guarantors, sureties, and endorsers. ECOA defines “applicant” as a person who applies for credit. Under the ECOA, only an “applicant” can bring a lawsuit for violation or utilize a violation as an affirmative defense to collection. “Applicant” includes “guarantors,” therefore, spouse-guarantor can enforce the ban by bringing an independent lawsuit for violation of ECOA and Regulation B. If the applicant is not independently creditworthy, the creditor may ask that another person co-sign the promissory note, but cannot require the person co signing to be the spouse.ī. ECOA prohibits a creditor from requiring a credit applicant’s spouse to serve as a guarantor. ECOA bans creditor from requiring a spouse to serve as a guarantor.ĮCOA and Regulation B prohibit discrimination against a borrower based on their marital status. ECOA Prohibits Discrimination Based On Marital StatusĪ. The Sixth Circuit Court of Appeals recently held that when a collection suit is filed against a spouse-guarantor, the spouse-guarantor can assert violation of the Equal Credit Opportunity Act (“ECOA”) and Regulation B as an affirmative defense.
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