Hi, a few things before the question: This is about indirect consumer auto finance, car dealer is submitting application through electronic portal, and car dealers are not to be trusted (trust me on this). This is NOT about second jobs or non-job income or anything like that. This is not about disparate impact of any protected class I know of. All applications with two people are submitted as joint applications (this is how this nationwide 3rd party portal works).

Given the above, I get a joint application. The only question allowed on fiduciary relationship is married or not. My question is: If that's the only information I get, how must (or can) I consider the incomes of the applicants? Here is the basic issue--how do I decide (other than married) when to combine incomes in my assessment of the application? I'm being told that because these are joint applications, I have to combine incomes no matter the relationship--even if it's just friends who don't live together and have no responsibilities toward each other. That seems absurd to me because the car is only for one of them and the other is really acting as a guarantor (and usually unreliable to boot), not a joint applicant. If it's two folks who have a real relationship or arrangement, in my mind there is no issue combining the incomes, but when they don't, I don't see how to do the right thing on ability to pay and stay in these ECOA rules.

What's happening in the real world is car dealers are taking two poor people, combining their incomes, and forcing lenders to finance them as one "non-poor" income, and the lawyers are forcing them to take them this way, when in reality there is a lack of ability to pay. So from a regulatory standpoint, if I don't combine incomes, I'm violating ECOA consideration of income, but if I approve the application based on that, I'm violating Ability To Pay. Can anyone make sense of this stuff?

It is pretty simple. If the applications come across as joint applicants, you have to combine the incomes - period - end of story. Otherwise, you would be discriminating based on marital status, or in this case, lack thereof. Trust me on this, as I was involved in a 20,000 in-direct dealer application look back for this very reason.

Now, if you have two applicants regardless of how you treat them for application analysis purposes and only one applicant is being titled on the car, then you better be providing the other applicant a notice of co-signer. Just because only one of the applicants might be a co-signer under the co-signer rules does not mean that they are not joint applicants under Regulation B. I also assume that there are provisions through the portal to actually submit applications that involved a co-signer and have them designated appropriately. If not, the portal is worthless.

It sounds like you need to reassess this "nationwide 3rd party portal", as would be required under your vendor due diligence, especially if you feel that the information being provided through the portal is not reliable. Also, I would be asking for the due diligence information and vetting practices of this vendor for the dealers for which they represent.

Randy is right on his analysis.

My 2 cents. The bank is making decisions on imperfect information and as you mentioned, potentially coercion. If the dealers understand the rules better than the bank, the bank has no reason to play the game. Your Risk Management Committee needs to decide if they want the risks, from dealers, opposing attorneys and regulators. You also indicated the credits were not that good to begin with. Profits are only good until losses or litigation, then the scapegoat naming begins.

MikeD, I just want to reiterate that you have received fantastic advise here:

-Step 1: Make sure you are evaluating income appropriately under Regulation B.
-Step 2: Ensure you are appropriately providing the co-signer notice.
-Step 3: Conduct a review of your "nationwide 3rd party portal" from both a vendor management perspective as well as a compliance-related third party relationship perspective (which could be one in the same if your organization considers both vendor management and Compliance considerations such as FL and UDAAP).
-Step 4: Take this relationship to a risk committee/board for a re-evaluation of the relationship.

Not taking these steps could lead to major issues such as exam violations, civil money penalties, and a referral to the Department of Justice.