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From Banking and Finance Law Daily, August 31, 2015

Solicitor General to argue appeal over spousal guarantee coverage

By Richard A. Roth, J.D.

The Supreme Court has granted the Solicitor General’s request for separate argument in an appeal from a decision that wives who claim a bank required them to guarantee their husbands’ business loans could not assert the Equal Credit Opportunity Act ban on requiring spousal signatures as a defense against the bank’s collection efforts. According to the U.S. Court of Appeals for the Eighth Circuit, the wives were not applicants for credit and thus the bank did not violate the ECOA by demanding their guarantees (see Hawkins v. Community Bank of Raymore, discussed at Banking and Finance Law Daily, Aug. 5, 2014).

While the Eighth Circuit concluded that the ECOA unambiguously excludes guarantors from being considered applicants, the Consumer Financial Protection Bureau took the opposite position in its amicus curiae brief. According to the bureau, the Reg. B—Equal Credit Opportunity (12 CFR Part 1002) definition of "applicant" that includes guarantors for purposes of the prohibition on marital status discrimination is a reasonable interpretation of the act to which courts should defer.

Circuits in conflict. The U.S. Court of Appeals for the Sixth Circuit agreed with the bureau in RL BB Acquisition, LLC v. Bridgemill Commons Development Group, LLC (see Banking and Finance Law Daily, June 13, 2014). The Sixth Circuit decided that the definition was ambiguous and that the regulatory agency interpretation was reasonable.

On the other hand, the U.S. Court of Appeals for the Seventh Circuit agrees with the Eighth Circuit. In Moran Foods, Inc. v. Mid-Atlantic Mkt. Dev. Co., the Seventh Circuit refused to allow a woman who joined her husband in guaranteeing the debts of her husband’s corporation to claim the benefits of Reg. B. Addressing the argument that “applicant” includes a guarantor, the Seventh Circuit said “We doubt that the statute can be stretched far enough to allow this interpretation.”

Argument has been scheduled for Oct. 5, 2015, the first day of the Court’s 2015 term.

The appeal is No. 14-520.

Supreme Court docket. For details about this and other petitions and cases pending before the Supreme Court, please consult this list of selected banking and finance law cases awaiting action in the 2015 term.

Attorneys: John Matthew Duggan and Jay T. Shadwick (Duggan Shadwick Doerr & Kurlbaum LLC) for Valerie J. Hawkins and Janice A. Patterson. Greer Shirreffs Lang (Lathrop & Gage, LLP) for Community Bank of Raymore.

Companies: Community Bank of Raymore

MainStory: TopStory EqualCreditOpportunity Loans

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