Does federal law protect loan guarantors from marital-status bias? SCOTUS accepts case
The U.S. Supreme Court on Monday agreed to hear a case involving two women who signed a personal guarantee for a $2 million loan on behalf of their husbands and the property development company they owned.
The women assert that the Equal Credit Opportunity Act protects guarantors from marital-status discrimination.
The wives, Valerie Hawkins and Janice Patterson, signed a loan agreement that made them “primarily and unconditionally liable” for loans to develop a residential subdivision in Missouri, according to SCOTUSblog and the cert petition (PDF). Community Bank of Raymore later sued the wives for the money, claiming it can collect the full amount without pursuing their husbands or the collateral, the cert petition says.
Hawkins and Patterson claim the required guarantees violated nondiscrimination provisions of the Equal Credit Opportunity Act. The St. Louis-based 8th U.S. Circuit Court of Appeals ruled the women were not protected because they were not “applicants” for credit as defined by the law, according to the brief in opposition (PDF) filed by the bank. The appeals court also said the Federal Reserve Board exceeded its authority when it issued Regulation B interpreting the term “applicants” to include guarantors.
Regulation B states that a “creditor shall not require the signature of an applicant’s spouse or other person … on a credit instrument if the applicant qualifies under the creditor’s standards of creditworthiness for the amount and terms of the credit requested.”
The issue in Hawkins v. Community Bank of Raymore is whether spousal guarantors are “applicants” for credit who are protected by the law, and whether the Federal Reserve Board exceeded its authority when it interpreted “applicants” to include guarantors.
