Wife and husband are good customers of bank. Most of their debt is jointly held. One of them comes to the bank and wants to borrow money to purchase a car – the loan will be just in their name. Because of the debt that is jointly held; they do not qualify for the loan because the bank can only use their individual income for underwriting purposes.

Let’s instead say that the customer has marked on the application, “Individual Credit – relying on my income or assets as well as income or assets from other sources.” Because they have marked that box, Appendix B to Reg. B states that section B of the application will be completed. In addition, I interpret the following commentary to Reg. B to say that if the applicant is relying on the income/assets of another person that the bank may require that person to sign the note. However, I’m guessing documentation will be key – to note that the applicant stated they were relying on the income/assets of another person – the person who is now signed as a co-borrower on the note. Or would the other person be a co-signer since they may not be receiving any benefit from the loan proceeds (car is not in their name).

BYW, we are not located in a community property state.

Commentary to 202.7(d)(5)

2. Reliance on income of another person—individual credit. An applicant who requests individual credit relying on the income of another person (including a spouse in a non-community property state) may be required to provide the signature of the other person to make the income available to pay the debt. In community property states, the signature of a spouse may be required if the applicant relies on the spouse’s separate income. If the applicant relies on the spouse’s future earnings that as a matter of state law cannot be characterized as community property until earned, the creditor may require the spouse’s signature, but need not do so—even if it is the creditor’s practice to require the signature when an applicant relies on the future earnings of a person other than a spouse. (See § 202.6(c) on consideration of state property laws.)

Is my interpretation correct?

If you need a signature on the note to make the income available, then that is what you can do. I would be running this by legal counsel however before proceeding as spousal signature violations can get ugly in an exam.