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#61238 - 02/13/03 08:43 PM REG B: Spousal signatures on overdraft lines
Bartman Offline
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Bartman
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Posts: 1,191
Springfield
As we transition to the ARTA system for document preparation and establish our different templates, loan operations would like to know whether they can require the signature of all parties on the checking account to sign on the overdraft line of credit contract.

I believe that if one spouse applies for the ODL individually, we can't obligate the other spouse on the contract. How do you handle this situation in your shop?
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Opinions are Bartman's, not those of my employer. "A noble spirit embiggens the smallest man."

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#61239 - 02/14/03 02:00 AM Re: REG B: Spousal signatures on overdraft lines
Princess Romeo Offline

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The Commentary for Reg B addresses this:


Section 202.7--Rules Concerning Extensions of Credit
7(a) Individual accounts.
1. Open-end credit--authorized user. A creditor may not require a creditworthy applicant seeking an individual credit account to provide additional signatures. However, the creditor may condition the designation of an authorized user by the account holder on the authorized user's becoming contractually liable for the account, as long as the creditor does not differentiate on any prohibited basis in imposing this requirement.
2. Open-end credit--choice of authorized user. A creditor that permits an account holder to designate an authorized user may not restrict this designation on a prohibited basis. For example, if the creditor allows the designation of spouses as authorized users, the creditor may not refuse to accept a nonspouse as an authorized user.
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.

Bottom line - You can (and should!) require all authorized persons to become liable as a condition of allowing the credit. However, you must do so equally. You cannot only require married persons on the same account to be liable and not have the same requirement for unmarried persons on the same account. Likewise, you cannot have different requirements depending if the applicant is male vs. female.

(Not so long ago, some banks would allow the husband to be the only person liable even if the account was joint with his wife. But if a female applied, she would be required to have her husband be liable. THAT'S the no-no.)
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Regulations are a poor substitute for ethics.
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#61240 - 02/14/03 02:03 AM Re: REG B: Spousal signatures on overdraft lines
Princess Romeo Offline

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I forgot to add - IF you report these lines to a credit bureau, you must report for all persons on the line, not just the husband.
_________________________
CRCM,CAMS
Regulations are a poor substitute for ethics.
Just sayin'

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#61241 - 02/14/03 05:29 PM Re: REG B: Spousal signatures on overdraft lines
Anonymous
Unregistered

Bonnie and Bart, I was very glad to see this post. We have been having this debate at my bank as well. Please give me your thoughts on this: what if the line of credit is not simply an overdraft line of credit? We have personal lines of credit, as well as home equity lines of credit, that are tied to transaction accounts where one (but not all) of the methods of access to the line is through an overdraft of the transaction account. Do you think this section of the commentary permits the bank to require non-applicant owners of the account to sign such a personal line of credit agreement or a home equity line of credit agreement when there is more than overdraft protection provided? Do you think the commentary is limited such that you can only require the other parties on the checking account to be liable for the overdraft portion of the line?

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#61242 - 02/17/03 06:10 AM Re: REG B: Spousal signatures on overdraft lines
Princess Romeo Offline

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Here's the basic problem - you NEVER want someone who is NOT obligated to the debt to have the ability to CREATE the debt.

If the others do not want to sign for personal liability, then you should require the single obligor to open a separate account. Otherwise, you may find yourself caught in the middle of some very nasty disputes.

I believe the regulators recognized this issue, and thus you have the Commentary.
_________________________
CRCM,CAMS
Regulations are a poor substitute for ethics.
Just sayin'

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#61243 - 02/17/03 06:18 AM Re: REG B: Spousal signatures on overdraft lines
Princess Romeo Offline

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Where the heart is
I should add that my above comment on debit liability and creation applies to consumer accounts. I do realize this does happen with business accounts all the time.
_________________________
CRCM,CAMS
Regulations are a poor substitute for ethics.
Just sayin'

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#61244 - 02/17/03 09:01 PM Re: REG B: Spousal signatures on overdraft lines
Bartman Offline
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Bartman
Joined: Oct 2000
Posts: 1,191
Springfield
Bonnie - thanks for your comments. That section of the regulation is exactly what we're looking for. (When in doubt, read the directions, right?)
_________________________
Opinions are Bartman's, not those of my employer. "A noble spirit embiggens the smallest man."

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#61245 - 03/12/03 10:56 PM Re: REG B: Spousal signatures on overdraft lines
Anonymous
Unregistered

I am bringing up this post again as I have just discovered that we are only reporting to the credit bureau the person named first on the account, and not both parties. I have told our system people that we must report all persons obligated on the line to the credit bureau, but am getting some flack. For backup to support this requirment, could someone please point me to the law that says we have to report both names to the credit bureau so that I can quote it to them. I would greatly appreciate it.

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#61246 - 03/12/03 11:34 PM Re: REG B: Spousal signatures on overdraft lines
Princess Romeo Offline

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Princess Romeo
Joined: Jun 2001
Posts: 8,272
Where the heart is
Reg B - 202.10

ยง 202.10 Furnishing of credit information.

(a) Designation of accounts. A creditor that furnishes credit information shall designate:
(1) Any new account to reflect the participation of both spouses if the applicant's spouse is permitted to use or is contractually liable on the account (other than as a guarator, surety, endorser, or similar party); and
(2) Any existing account to reflect such participation, within 90 days after receiving a written request to do so from one of the spouses.
(b) Routine reports to consumer reporting agency. If a creditor furnishes credit information to a consumer reporting agency concerning an account designated to reflect the participation of both spouses, the creditor shall furnish the information in a manner that will enable the agency to provide access to the information in the name of each spouse.
(c) Reporting in response to inquiry. If a creditor furnishes credit information in response to an inquiry concerning an account designated to reflect the participation of both spouses, the creditor shall furnish the information in the name of the spouse about whom the information is requested.
_________________________
CRCM,CAMS
Regulations are a poor substitute for ethics.
Just sayin'

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