The Eighth Circuit recently issued a decision regarding the Equal Credit Opportunity Act (“ECOA”) that may change your bank’s approach to spousal guaranties. 

In the case of Hawkins v. Community Bank of Raymore, the plaintiffs guaranteed loans made to an LLC owned by their husbands.  The plaintiffs’ husbands were not borrowers on loan, but were also guarantors.  The plaintiffs filed suit claiming that the bank violated ECOA by requiring them to sign guaranties solely because of their marital status.  The Eighth Circuit held that because ECOA only protects “applicants” against discrimination based on marital status, the bank did not violate ECOA by requiring the plaintiffs to sign guaranties.  The Court specifically held that a guarantor is not protected from marital status discrimination by ECOA. 

For banks located within the Eight Circuit, this decision may give additional leeway to requesting spousal guaranties.  However, before making any changes to your internal policies, you should note that other courts, including the Sixth Circuit, have not reached the same conclusion as the Eighth Circuit with respect to guarantors under ECOA.