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High Court Silent on Deference to Agency Rule-Making


Valerie L. Hletko, Caroline M. Stapleton

On March 22, 2016, the U.S. Supreme Court issued a split decision (4-4) in Hawkins v. Community Bank of Raymore.[1] The court’s one-sentence affirmance was a notable anti-climax in a case that had been viewed as likely to elicit guidance regarding limitations on deference to agency statutory interpretations. At issue in the case was the viability of a Board of Governors of the Federal Reserve System rule extending the protections of the Equal Credit Opportunity Act (ECOA) to spousal guarantors, in addition to traditional applicants for credit. While the court’s decision affirms the Eighth Circuit’s holding that the board’s spousal guarantor rule is not entitled to deference within that jurisdiction, affirmance by an equally divided court does not resolve the issue with respect to other circuits that already have considered, or have not yet confronted, the validity of the board’s rule. Moreover, in the absence of a substantive rationale, creditors operating outside of the Eighth Circuit are left with continued uncertainty regarding whether they may be subject to discrimination claims under ECOA by spousal guarantors.

ECOA and the Spousal Guarantor Rule

ECOA states that it is “unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction — (1) on the basis of [...] sex or marital status.”[2] Congress broadly defined the term “applicant” to encompass: 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.[3]

Regulation B, which implements ECOA, was originally drafted and administered by the Federal Reserve Board.[4] Initially, the board defined “applicant” under Regulation B to expressly exclude guarantors.[5] However, the board later amended its definition to include guarantors and other similar parties,[6] explaining that a spouse who is required to serve as a guarantor simply because he or she is married to a party to the debt “has suffered discrimination based on marital status” within the meaning of ECOA.[7] The board’s expansion of the scope of ECOA to encompass spousal guarantors is often referred to as the spousal guarantor rule.

Originally published in Law360; reprinted with permission.

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