With a 4-4 split vote following the death of Justice Antonin Scalia, the U.S. Supreme Court let stand an Eighth Circuit Court of Appeals decision finding that the Equal Credit Opportunity Act’s protections apply only to loan applicants, not to those who guarantee the loans. ABA and the Missouri Bankers Association had urged the court to uphold the Eighth Circuit ruling in a friend of the court brief last year.
In the case, Hawkins v. Community Bank of Raymore, two wives who had been required to guarantee business loans made to their husbands brought suit, claiming that the guarantee requirement violated ECOA’s prohibition on discrimination based on marital status. ABA and others argued that common lending practice requires lenders to seek guarantees from spouses when the applicant’s assets are jointly owned.
ABA also argued that ECOA’s precise wording applies its protections only to applicants, not to additional guarantors. To apply ECOA to guarantors would expose lenders to substantially higher litigation risk, ABA argued.
Because of the even split, the high court’s decision in Hawkins applies only to the Eighth Circuit and other circuits where courts have reached the same interpretation. For more information, contact ABA’s Tom Pinder.