Is asking about the relationship status of two applicants applying for a loan (indirect auto loan) really discrimination? We aren’t asking what their marital status is, just if they’re married to each other, in a relationship with each other, etc. Both customers could be married to someone who is not on the loan, or they could both be single. We aren’t asking those questions, we are just asking what the relationship between the two applicants is. I don’t ask outright if customers are married, however I have asked what the relationship between applicants is, as this is an important factor when assessing risk on a loan.

Why is that important when assessing the risk?

You can ask them if they are married, unmarried, and separated. You can then only inquire about the spouse or former spouse under 1002.5(c). Asking what the two applicant's relationship with each other circumvents this entire process and will lead you to a Regulation B violation.

Here's two scenarios nearly identical credit, but completely difference circumstances:

Scenario 1 - applicant with good credit score, low debt ratios, co-applicant has 0 credit score (no file), different surname, different address. No shared debt on bureau between the two. Ends up this is a step-father and son relationship.

Scenario 2 - applicant with good credit score, low debt ratios, co-applicant has 0 credit score (no file), different surname, different address. No shared debt on bureau between the two. Ends up co-applicant is an exotic dancer and applicant is her customer. They've known each other for a short time and he decided to purchase a car for her.

I don’t know, and do not care about, the marital status of either applicant. What I want to know is how likely is one applicant to pay if the other does not. And what are the chances that one of them will or won’t? Knowing what kind of connection/ties the two applicants have, certainly helps with this. But we still aren't allows to ask what the relationship is between the two applicants??

To comply with BSA/AML requirements, you ask the purpose of the loan. If the answer is to buy a car for my girlfriend I met at the strip club or online, then you make a determination whether you believe your customer to be an elder abuse/scam victim.

"What I want to know is how likely is one applicant to pay if the other does not. And what are the chances that one of them will or won’t?"

If you can perfect the answer to this question you will become a billionaire overnight. What if the step-father son have a huge fight and are no longer on speaking terms? There's no guarantee your loan will be paid. What if the dancer and customer do get married?

The credit score (or lack of) is usually the standard by which banks judge who will/won't pay. Even that is flawed - an 800 credit score just might lose a job and can no longer make payments. A 560 might find a lucky break and suddenly becomes Mr. Dependable.

In short - that question will give you little or no guarantee, and can only cause you issues later on.

These scenarios are with regard to indirect lending, so purpose is always to purchase a vehicle.

So what makes you think that a step son is any more likely to pay the debt than the exotic dancer if the primary creditworthy borrower decides not to pay? Sounds like you need to rethink your underwriting criteria and not be asking questions that can jeopardize your compliance with Regulation B. If the son is White and the exotic dancer is not, you just fell on your fair lending sword.

I guess I don't see what benefit you gain from asking if applicants are married to each other. The question on the application is marital status (not martial status to the co-applicant). Two applicants, same last name, around the same age. Both check married on the application. So you assume they are married to each other, which by your logic is a "better" loan. Who's to say they aren't brother and sister?

Like others have mentioned, it sounds like you got big Reg B issues on your hands.

What is the applicants are two men, or two women? Are you asking if they are married in that scenario?

If you ask any coapplicants, you should ask all coapplicants.