Compliance Blog

Written by Steve Van Beek

Last week, we looked at the Philadelphia Federal Reserve's latest Consumer Compliance Outlook.

I wanted to focus in on one of the Common Compliance Violations mentioned - joint credit and spousal signatures.  Below is the beginning of the discussion: 

"Regulation B/Equal Credit Opportunity Act

Spousal Signatures

When a married applicant applies for credit individually and qualifies under the creditor's standards for creditworthiness, the creditor is prohibited by 12 C.F.R. §1002.7(d)(1)  from requiring the signature of the applicant's spouse on the credit instrument subject to limited exceptions. The exceptions in §1002.7(d) include when the spouse's signature is necessary under applicable state law to provide a secured creditor access to collateral in the event of default or to provide an unsecured creditor access to property relied upon in the event of death or default. A spouse's signature is also permissible on the credit instrument if the applicant does not qualify under the creditor's lending standard and the spouse chooses to provide credit support.

If an applicant intends to apply for credit jointly with a spouse, their joint intent must be evidenced at the time of application. Signatures on the promissory note are insufficient. Also, the method used to establish joint intent must be distinct from the means used to affirm the accuracy of information in the application. For example, financial statements affirming the veracity of information do not establish joint intent. But creditors can rely on signatures or initials on a credit application affirming the applicants' intent to apply jointly.^2"

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While these are common issues at institutions examined by the Federal Reserve, they can be useful reviews and reminders for credit unions as well.  

And, they should also serve as reminders to the regulators to review the regulatory requirements as less than straightforward language might be part of the issue with some of these Common Compliance Violations.  Just a thought.