Opinion ID: 2225578
Heading Depth: 1
Heading Rank: 4

Heading: Whether Christine and Phyllis Can Assert Violations of the ECOA.

Text: Bank of the West argues the district court erred by holding Christine and Phyllis could assert violations of the ECOA. The district court concluded Christine and Phyllis could assert ECOA violations because they were required to execute personal guaranties even though there was no prior determination by CFB that their spouses were not sufficiently creditworthy. Bank of the West claims Christine and Phyllis cannot assert ECOA violations because they do not qualify as applicants under the ECOA. The ECOA provides that, It shall be unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction... on the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract). 15 U.S.C. § 1691(a)(1) (2000) (emphasis added). The ECOA defines applicant as, any person who applies to a creditor directly for an extension, renewal, or continuation of credit, or applies to a creditor indirectly by use of an existing credit plan for an amount exceeding a previously established credit limit. 15 U.S.C. § 1691a(b). Viewing this definition of applicant without more, it appears Bank of the West's claim has merit. In this case, Acme was the only defendant that applied to a creditor for credit. Thus, under the ECOA definition only Acme would qualify as an applicant. Prior to 1986, we would have agreed with the bank. See Marine Am. State Bank of Bloomington, Ill. v. Lincoln, 433 N.W.2d 709, 713 (Iowa 1988) (holding a spouse who guaranteed a loan in 1981 was not an applicant under the ECOA). However, the ECOA authorizes the Board of Governors of the Federal Reserve System (Board) to enact regulations to carry out the purposes of the ECOA. 15 U.S.C. § 1691b(a)(1). The regulations promulgated by the Board are codified in Regulation B. See 12 C.F.R. §§ 202.1-.16 (2004). In 1986, the Board amended the definition of applicant under Regulation B to provide: Applicant means any person who requests or who has received an extension of credit from a creditor, and includes any person who is or may become contractually liable regarding an extension of credit. For purposes of § 202.7(d), the term includes guarantors, sureties, endorsers, and similar parties. 12 C.F.R. § 202.2(e) (emphasis added). Originally, Regulation B's definition of applicant excluded guarantors. Douglas County Nat'l Bank v. Pfeiff, 809 P.2d 1100, 1102 (Colo.Ct.App.1991); Kevin A. Palmer & Michael H. Malin, Jr., ECOA, Regulation B, and the Spousal Guaranty: Recent Developments, 115 Banking L.J. 357, 359 (1998). The primary purpose of the 1986 amendment was `to give guarantors and similar parties standing to seek legal remedies when a violation occurs under § 202.7(d).' Pfeiff, 809 P.2d at 1103 (quoting Final Rule Revising Regulation B, 50 Fed. Reg. 48,018, 48,020 (Nov. 20, 1985) (Official Staff Commentary)); see also Joel D. Stafford, Consumer Protection: The Equal Credit Opportunity Act: Guarantors as ApplicantsDid the Cost of a Violation Go Up?, 40 Okla. L.Rev. 431, 442-43 (1987) [hereinafter Stafford Article] (recognizing the amendment provides regulatory standing to a guarantor to sue for violations of Regulation B's cosignature rules). Consequently, for purposes of § 202.7(d), a guarantor expressly falls within the meaning of applicant and therefore can assert an ECOA violation. 12 C.F.R. § 202.2(e); see also F.D.I.C. v. Medmark, Inc., 897 F.Supp. 511, 514 (D.Kan.1995) (stating [t]he term `applicant' encompasses any person who is or may become contractually liable regarding an extension of credit, including guarantors); Pfeiff, 809 P.2d at 1102-03 (same); Lincoln, 433 N.W.2d at 712-13 (recognizing Regulation B's definition of applicant was amended so as to include guarantors). In this case, Christine's and Phyllis's alleged ECOA violations arise under Regulation B § 202.7(d) because they claim the bank illegally obtained their spousal guaranties. See 12 C.F.R. § 202.7(d) (regulating when a creditor may require a spouse's signature); Official Staff Interpretations, 12 C.F.R., Part 202, Supp. I, § 202.7(d)(6) (stating section 202.7(d) bars a creditor from requiring the signature of a guarantor's spouse just as it bars a creditor from requiring the signature of an applicant's spouse). Thus, as guarantors, Christine and Phyllis are applicants under the ECOA and can assert alleged ECOA violations against Bank of the West.