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Client Alert
March 27, 2015
Supreme Court to Determine Whether ECOA
Allows Spousal Guarantors to Challenge
Liability
By Joe Rodriguez and James Nguyen
On March 2, 2015, the Supreme Court of the United States granted certiorari in Hawkins v. Cmty. Bank of
Raymore, 761 F.3d 937 (8th Cir. 2014), cert. granted, No. 14-520, 2015 U.S. LEXIS 1635 (U.S. Mar. 2, 2015)—on
appeal from the Eighth Circuit—to decide whether certain guarantors are excluded from the definition of
“applicant” under the Equal Credit Opportunity Act (ECOA), 15 U.S.C. § 1691 et seq., and whether the Federal
Reserve Board (FRB) had the authority under the ECOA to include certain guarantors as “applicants” in
Regulation B, 12 C.F.R. pt. 1002 et seq. A decision by the Court could resolve a circuit court split between the
Sixth and Eighth Circuits.
CIRCUIT COURTS DISAGREE ON WHETHER THE TERM “APPLICANT” IS AMBIGUOUS
The ECOA provides that it is “unlawful for any creditor to discriminate against any applicant, with respect to any
aspect of a credit transaction” on a number of bases, including marital status. See 15 U.S.C. § 1691. W hile 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)), Regulation B sets forth its own definition, which is
broader than the statute and allows guarantors to sue for violations of the spouse-guarantor rule. See 12 C.F.R.
§ 1002.2(e) (defining “applicant” under Regulation B); 12 C.F.R. § 1002.7(d)(5) (“The applicant’s spouse may
serve as an additional party [supporting the application], but the creditor shall not require that the spouse be the
additional party.”).
At issue in Hawkins is whether the ECOA’s definition of “applicant” includes guarantors such that a spousal
guarantor can enforce the protection from marital status discrimination under the ECOA. According to the Eighth
Circuit, the “text of the ECOA clearly provides that a person does not qualify as an applicant under the statute
solely by virtue of executing a guaranty to secure the debt of another.” The Eighth Circuit reasoned that a person
does not request credit by “executing a guaranty” because a “guaranty is collateral and secondary to the
underlying loan transaction between the lender and the borrower.” As a result, the Eighth Circuit concluded that it
would not need to rule on the reasonableness of the FRB’s interpretation of “applicant” because the plain
meaning of the statute is “unambiguous” and “a guarantor is not protected from marital status discrimination by
the ECOA.”
In contrast, the Sixth Circuit in RL BB Acquisition, LLC v. Bridgemill Commons Dev. Grp., LLC, 754 F.3d 380 (6th
Cir. 2014) held that the ECOA’s definition of “applicant” is ambiguous and “could be construed to cover a
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