DATE: November 14, 2003
TO: The Chief Executive Officer/President of the Bank Addressed
FROM: David G. Kroeger, Director of Banks
SUBJECT: Spousal Signature Provisions of Regulation B
A number of Washington state chartered financial institutions have been cited in recent compliance examinations for violations of the Equal Credit Opportunity Act. Managements are advised to review Federal Reserve Board Regulation B (Reg. B) 12 C.F.R. Part 202, which implements the Equal Credit Opportunity Act (ECOA).
Reg. B limits when a creditor may seek an applicant’s spouse as a co-signor or guarantor. Managements should review their internal policies and procedures regarding Section 202.7 - Rules concerning extensions of credit. Violations of the Equal Credit Opportunity Act are subject to referral to the United States Department of Justice.
The FDIC issued Financial Institution Letter 09-2002: Guidance on the Spousal Signature Provisions of Regulation B, on February 4, 2002. The FDIC letter suggests institutions adopt a three-prong approach to ensuring compliance with the spousal signature rules:
A. Review and revise loan policies and procedures regarding spousal signatures
- Eliminate loan policies or procedures that are inconsistent with Regulation B’s spousal signature provisions.
- Expand loan policies and procedures to provide loan staff with specific guidance on state law regarding necessary signatures, particularly in community property states.
- Create or amend checklists to address when spousal signatures may be obtained in connection with an individual application for credit.
B. Provide periodic training to both consumer and commercial loan staff
The Regulation B requirements regarding spousal signatures apply to all loans, consumer and commercial.
C. Monitoring and Audits
Incorporate into the bank’s compliance program a check for spousal signature violations.