Institutional lenders understand well Florida’s tenants by entireties protection, and they understand that they may not be able to enforce promissory notes against a married borrower unless the note is signed by both the borrower and his spouse. For this reason, most lenders will insist on joint signatures to loans or guarantees of business loans where a single spouse is the primary loan applicant.
A common example is a husband who runs and owns a business applies for a commercial loan, and the bank approves the loan conditional upon the wife co-signing a guarantee even though the wife has nothing to do with the business and has no independent income.
A recent Florida appellate case held that banks’s demand joint signatures on loans or guarantees may be illegal when the loan is adequately supported by the applicant spouse’s income and credit score. The court suggested that a bank’s request for the spouse’s signature when the bank is simply trying to defeat entireties ownership may be in violation of the Equal Credit Opportunity Act, 15. U.S.C 1691.
The EOCA states in part that a creditor shall not require the signature of an applicant’s spouse on any credit instrument if the applicant by himself qualifies under the creditor’s standards of creditworthiness. The law applies to commercial loans as well as consumer loans. The ECOa provides that an applicant who incurs a violation of the Act may recover actual damages, attorneys fees, and punitive damages. There is a two year statute of limitation.
In this particular case, a lender tried to sue a husband and wife jointly on a jointly executed guarantee of a commercial loan. The wife raised an affirmative defense as to her own liability based upon an alleged EOCA violation in requiring her joint signature on the loan guarantee. The Florida court said that the wife raised a legitimate affirmative defense even though the statute of limitations had expired. A violation of the Act as to the wife will not affect the validity of the husband’s guarantee. Chen v. Whitney National Bank, 65 So 3d. 1170.
Businessmen who are required to obtain their spouse’s signatures on business loans may have an immediate cause of action against their lenders for ECOA violations according to this case. Bankruptcy debtors may assert the same theory as adversary proceeding in order to protect entireties assets or to offset lenders’ claims.