“The judgment is affirmed by an equally divided Court.” One sentence, published by the United State Supreme Court on March 22, 2016 sealed the fate of two plaintiffs seeking to expand protections under the Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691 et seq., to allow spousal guarantors to bring claims against creditors for marital discrimination. A 4-4 ruling by the Supreme Court (the first even-split Court since the death of Justice Antonin Scalia) did not set precedent, but limited the definition of “applicant” under the ECOA within the boundaries of the Eighth Circuit.
Hawkins v. Community Bank of Raymore involved two Missouri plaintiffs, Valerie Hawkins and Janice Patterson, acting as personal guarantors on loans provided to their respective husbands for a business endeavor. The endeavor was unsuccessful, the husbands defaulted on their loans, and the bank pursued payments totaling more than $2 million. After the bank sued the guarantors for moneys owed, including the spousal guarantors, Hawkins and Patterson filed an action against the bank. Plaintiffs Hawkins and Patterson alleged that the bank requirement for the wives to serve as loan guarantors strictly because of their marital status violated the ECOA. The Bank argued that the term “applicant” did not extend to a spousal guarantor, but merely to the individual requesting the credit; in this instance, the husbands. The Missouri district court ruled in favor of the bank on summary judgment and the U.S. Court of Appeals for the Eight Circuit agreed.
The ECOA, passed in 1974, strictly prohibits creditors from discriminating against a credit “applicant” on the basis of sex or marital status (the statute would be amended two years later to include prohibitions against discriminating on the basis of race, color, religion, national origin, age, receipt of public assistance, and the good faith exercise of rights under the Consumer Credit Protection Act). One of the goals of the statute was to extend protections against credit discrimination for married woman. In 1985, under Regulation B, the Federal Reserve Board (Fed) expanded the definition of applicant to include spousal guarantors. Under the authority of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank), the Consumer Financial Protection Bureau (CFPB) was provided with rule-making authority, as well as the supervision for and enforcement of compliance under the EOCA. Similarly to the Fed position, the CFPB extended the definition of “applicant” to include spousal guarantors.
Despite the expansion of the term applicant by the Fed and the CFPB, the Eighth Circuit agreed with the district court that the term applicant refers only to the plain language text found in the ECOA: “the term ‘applicant’ means 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.” Using the two-pronged approach utilized in the Supreme Court’s decision in Chevron U.S.A. Inc. v. Natural Resources Defense Council Inc. (1984), an agency interpretation of a statue should: 1) ask if Congress directly spoke to the issue and 2) ask whether the agency answer is based on a permissible construction of the statute. Here, the Eighth Circuit reviewed the plain language of the ECOA, ruling that the term applicant solely related to a person requesting credit and did not extend to a spousal guarantor.
The 4-4 split, however, means that the term applicant as interpreted by the Eighth Circuit is limited to that jurisdiction. Other courts have ruled in favor of allowing claims for marital discrimination against creditors under the ECOA in situations of spousal guarantors. For example, the United States Court of Appeals for the Sixth Circuit found that the Regulation B definition of applicant was an allowable interpretation under the ECOA statute. Furthermore, the United States Court of Appeals for the Third Circuit also ruled that a spousal guarantor was not barred from bringing an ECOA claim under the Regulation B amendment.
For now, the ability for spousal guarantors to bring claims under the ECOA will depend on the jurisdiction of the court involved. We must wait until the Supreme Court is back at full-strength for this issue to be fully resolved.