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#1967001 - 10/03/14 07:33 PM Require an application and signer to an LOC
Marnie Offline
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We offer a separate overdraft line of credit tied to a checking account that advances funds to the account if needed to cover presented items so there is no overdraft.

So the scenario is "Bob" was sole signer on the account and he qualified for the line of credit in his name and has had it for a while. "Bob" gets married and adds "Suzy" to the checking account. Can the bank REQUIRE Bob and Suzy to reapply for the line, now that she is a signer on the deposit account, particularly since Bob is okay with full liability and qualifies on his own? Some are saying if she is on the account, she has to be approved for the line because they are tied. I think this may be a violation of REG B to require someone to apply in order to be on the account, particularly if the signers don't want to, and just have Bob responsible.

By the way, nothing in the agreement or disclosure addresses this in any way. It is a typical agreement for a line of credit with no mention of a checking account. But even if that language was added, can we require someone to be on a loan because they are on an account?

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#1967017 - 10/03/14 08:06 PM Re: Require an application and signer to an LOC Marnie
Dan Persfull Offline
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From Reg. B 1002.7's Commentary

3. Overdraft authority on transaction accounts. If a transaction account (such as a checking account or NOW account) includes an overdraft line of credit, the creditor may require that all persons authorized to draw on the transaction account assume liability for any overdraft.

Now, whether you can require it after the fact is a matter to discuss with your attorney.
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#1967023 - 10/03/14 08:21 PM Re: Require an application and signer to an LOC Dan Persfull
John Burnett Offline
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Just to settle out matters of who owes what to whom, the event would be a good one to be marked with a closing of the individual account and the opening of a new, joint, account.
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#1967045 - 10/03/14 09:06 PM Re: Require an application and signer to an LOC Marnie
rlcarey Offline
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I agree with John.

The real issue is if Suzy causes the overdraft, under what authority are you advancing Bob's funds - married or not.
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#1967220 - 10/06/14 06:40 PM Re: Require an application and signer to an LOC rlcarey
Marnie Offline
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The commentary says "Overdraft authority on transaction accounts. If a transaction account (such as a checking account or NOW account) includes an overdraft line of credit includes an overdraft line of credit, the creditor may require that all persons authorized to draw on the transaction account assume liability for any overdraft."

But in this case, the transaction account does not include an ODL. It is something they can apply for if they want, but not automatic. Wouldn't that make a difference?

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#1967224 - 10/06/14 06:45 PM Re: Require an application and signer to an LOC Marnie
Dan Persfull Offline
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Quote:
But in this case, the transaction account does not include an ODL.


We offer a separate overdraft line of credit tied to a checking account that advances funds to the account if needed to cover presented items so there is no overdraft.

So the scenario is "Bob" was sole signer on the account and he qualified for the line of credit in his name and has had it for a while. "Bob" gets married and adds "Suzy" to the checking account.


The above statement sure lead us to believe you were referencing an ODL.

You will need to reference your loan documents and spend some time with your bank's attorney to see what your options are.
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#1967244 - 10/06/14 07:17 PM Re: Require an application and signer to an LOC Marnie
Marnie Offline
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I was just clarifying that the account does not automatically have an overdraft line of credit. It is something that is applied for, contrary to the commentary that says the transaction account includes an overdraft line. What is happening is that unless Bob and Suzy reapply jointly after her being added as joint on transaction account, and are approved together, the line will be closed because it is only under Bob's name. You are saying that is perfectly acceptable, and not a violation, by requiring Suzy to apply.

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#1967250 - 10/06/14 07:29 PM Re: Require an application and signer to an LOC Marnie
Dan Persfull Offline
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I was just clarifying that the account does not automatically have an overdraft line of credit.

I'm not aware of any demand account that has an automatic ODL tied to it with out the account holder applying for it, or are you saying the account does not have an automatic ODL tied to it and that you manually cover ODs from a business or personal LOC?

The question remains, do you or do you not have a ODL?

The answer to that question will dictate what action you can take.

1. As I previously said requiring Suzy to apply after the fact is a legal question for your attorney.

2. As John & Randy stated if you do have a ODL close it under the terms of the agreement and require both to reapply. If it's not a ODL then you will have to review the loan documents and visit with your attorney to see what your options are.

You are saying that is perfectly acceptable, and not a violation, by requiring Suzy to apply.

If it is a Overdraft Line of Credit, yes.
Last edited by Dan Persfull; 10/06/14 07:30 PM.
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#1967251 - 10/06/14 07:31 PM Re: Require an application and signer to an LOC Marnie
rlcarey Offline
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after her being added as joint on transaction account,

As was indicated, I would not suggest that you add her to the existing account.

If they want a joint account, they should open one. If they want an attached line of credit, they should apply for one.

I would highly not recommend that you close Bob's line of credit because he got married, which is what you are proposing to do......... That is a whole new can of worms that should be left with the lid tightly on.
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#1967279 - 10/06/14 07:57 PM Re: Require an application and signer to an LOC Marnie
Marnie Offline
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Thank you both for your answers.

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