Compliance Q&A: Five Questions about the Equal Credit Opportunity Act (Reg. B)
Thursday, November 15, 2012
Question: In taking a loan application, may a credit union ask about the applicant's spouse?
Answer: Yes, but only in limited situations: When the spouse will be a user of the account (such as a credit card account) or joint obligor; the applicant is relying on the spouse's income to repay the debt; the applicant is in a community-property state or relies on property in such a state for repayment; or the applicant is relying on alimony, child support or maintenance as a source of income for repayment.
Question. When may a credit union require the signature of a spouse?
Answer: A credit union may not require a signature, other than the applicants or joint applicants, if the applicant qualifies for the type and amount of credit requested. If using objective standards the applicant does not qualify, the credit union may then request a cosigner or guarantor. However, the credit union must require a cosigner or guarantor for all similarly situated applicants; the spouse may not be required to be the cosigner; and requirements may not be imposed on the cosigner or guarantor that the credit union is prohibited from imposing on the applicant.
Question. May a credit union require an applicant to use one name consistently on loan applications?
Answer: Yes, but the credit union may not refuse to allow an applicant to use her maiden name or a combination of her name and her spouse's name. Regarding credit history, the credit union may ask if an applicant has obtained credit in another name or is liable for accounts under another name.
Question. What does ECOA require regarding furnishing credit information?
Answer: Reg B does not require credit unions to provide credit information. If they do, they must designate any new account to reflect that both spouses use or are liable for the account, if this is the case. For an existing account, the credit union within 90 days must reflect on the account that both spouses participate, if one of the spouses so requests it. If a credit union provides credit information in response to a credit reporting agency's request, the credit union must provide information in the name of the spouse about whom the information was requested.
Question: Does Regulation B require the credit union to send an adverse action notice if a member requests a reduction in a line of credit?
Answer: No, the member’s request would not trigger an adverse action notice under Reg B. The member made the decision to lower the credit limit, not the credit union. A change in terms expressly agreed upon by the member does not qualify as adverse action under the Equal Credit Opportunity Act (ECOA) and Regulation B.
Section 1002.2(c) of Reg B defines adverse action as:
- a refusal to grant credit in substantially the amount or on substantially the terms requested in an application unless the credit union makes a counteroffer (to grant credit in a different amount or on other terms) and the applicant uses or expressly accepts the credit offered;
- a termination of an account or an unfavorable change in the terms of an account that does not affect all or a substantially all of a class of the credit union's accounts; or
- a refusal to increase the amount of credit available to an applicant who has made an application for an increase.
Adverse action does not include:
- a change in the terms of an account expressly agreed to by an applicant;
- any action or forbearance relating to an account taken in connection with inactivity, default, or delinquency as to that account;
- a refusal or failure to authorize an account transaction at a point of sale or loan, except when the refusal is a termination or an unfavorable change in the terms of an account that does not affect all or a substantial portion of a class of the credit union's accounts, or when the refusal is a denial of an application for an increase in the amount of credit available under the account;
- a refusal to extend credit because applicable law prohibits the credit union from extending the credit requested; or
- a refusal to extend credit because the credit union does not offer the type of credit or credit plan requested.