Do We Now Need Business Loan Applications?
by Dan Persfull and Richard Insley, BOL Gurus Guru BIOS
Question: I have heard that a number of institutions are implementing business credit applications specifically because of the spousal signature requirements (evidence of intent). These applications are often cumbersome and inefficient for businesses to complete. Based upon my review of regulation B and the changes regarding signatures, I still see no requirement or regulation that suggest a business application is required. Am I correct or still missing the boat?
Answer by Dan Persfull: You are correct. You only have to show evidence of applying for joint credit, and that does not have to be done in an application form.
Answer by Richard Insley A former employer was sued by the wife of a principal of a commercial borrower for an alleged violation of ECOA (marital status discrimination) circa 1985. The suit alleged that the bank had required her signature illegally on a credit guarantee agreement to support a floor plan line of credit.
In the aftermath of this case, our lawyers designed a "short form application" to be completed and signed by all individuals who were to become liable in any capacity for a commercial credit. The form was VERY basic, but it put the burden on the commercial applicant. If principals and spouses offered to become liable, we required a joint financial statement and evaluated them together. If spouses were not offered, we demanded a financial statement stripped of the spouse's claim to jointly-owned assets.
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