Borrower and borrower's son owned all the stock in a corporation. Borrower and the corporation applied for a loan from Bank. Bank agreed to make the loan only on the condition that Borrower's wife guarantee the loan. Later, spouse alleged that the Bank's action was a violation of the Federal Equal Credit Opportunity Act.

Held: There is no violation of the Act. 12 C.F.R. 202.7 (d) (1) states that "a creditor shall not require the signature of an applicant's spouse . . . on any credit instrument if the applicant qualifies under the creditor's standards of creditworthiness for the amount and terms of the credit reqested." Under this regulation, the wife had the burden to demonstrate that the husband and the corporation met the bank's standards of creditworthiness. The bank did not have to demonstrate that they failed to meet the standard.

Note: The court's interpretation of this section of the regulations is not particularly surprising. What is surprising, however, is the court's failure to mention the language appearing a few paragraphs later in the same regulation. 12 C.F.R. 202.7(d)(5) states:

"If, under a creditor's standards of creditworthiness, the personal liability of an additional party is necessary to support the extension of the credit requested, a creditor may request a cosignoer, guarantor, or the like. The applicant's spouse may serve as an additional party, but the creditor shall not require that the spouse be the additional party."

The court's own description of the facts of these case appears to set forth a clear violation of this section of the regulations. Perhaps other facts in the case, not pointed out by the court, render this portion of the regulations moot. But the omission of this controversial and difficult section of the regulations is noteworthy.

In another portion of the case, the court held that the spouse/guarantor had failed to allege facts to support her contention that statute of limitations should be equitably tolled as to several of the promissory notes at issue.

Comment: When does a "suggestion" become a requirement? Under the Act, it is perfectly acceptable to accept a guarantee from one spouse where the other spouse's credit is insufficient. It is also acceptable to receive a joint application from two spouses. The bank, however, is not permitted to "require" that credit problems be resolved by the participation of the borrower's spouse, rather than through some other unspecified mechanism. The line is a difficult one to draw, and undoubtedly these regulations bedevil lawyers attempting to draft compliance manuals for their bank clients.

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