I am told it is common practice for banks to require that co-borrowers reside at the same address in indirect lending deals (loans from auto dealerships). The intent is to avoid financing higher risk straw purchases where the co-borrower has no real interest in the deal. I'm concerned that requiring co-borrowers to reside at the same address could have fair lending implications. Has anyone else run into this?

I've never heard of that requirement but I could imagine it not a good thing if a parent wants or needs to help out their college-age kid who might be out on their own financing a car, for instance.

It most likely would have a disparate impact on non-married borrowers.

You are also basically designating who the co-signer will be by limiting the applicant's choice because in that situation 95% of the time it will be a spouse or parent that they reside with.


I am told it is common practice for banks to require that co-borrowers reside at the same address in indirect lending deals (loans from auto dealerships).

In my 30 + years I have never heard of such a stipulation. I have seen where the co-signer must reside in the bank's market area and that is one of the allowable requirements referred to in Reg. B.

Thanks everyone. You confirmed what I was thinking.