Deference in Decline: ECOA's Regulation B and Agency Discretion Might Not Be Broad Enough to Include Spousal Guarantors

For more than 40 years, the Equal Credit Opportunity Act (‘‘ECOA’’)¹ has prohibited lenders from discriminating against applicants for credit on various prohibited bases, including marital status. The policy reasons for such protections, including ensuring that married women have full access to credit, are plain. There is no indication, however, that the statute was intended to cover lenders’ interest in the transparency of their commercial debtors’ assets. Notwithstanding, since 1985, the Board of Governors of the Federal Reserve System’s (‘‘Board’’) Regulation B3 has extended its protection to spousal guarantors in credit transactions—and multiple federal circuit courts of appeals have affirmed. A recent Eighth Circuit decision rejected the Board’s interpretation for the first time, finding that the plain language of ECOA unambiguously excludes spousal guarantors from the statute’s purview. The circuit split created by this decision raises important questions not only about the scope of ECOA with respect to spousal guarantors, but also more generally regarding the degree of judicial deference that the Board and other federal agencies can expect going forward to their increasingly broad interpretations of fair lending laws.

Originally published in BNA's Banking Report; reprinted with permission.