For women trying to exercise their rights to equal credit, the situation gets curiouser and curiouser. In a column published Oct. 22, I repeated some bum information I got from the Federal Trade Commission -- one of the enforcers of the equal-credit laws -- about the scope of your protection.
The Federal Reserve Board -- another one of the enforcers -- went into a tizzy about the mistake, which is corrected below. But the Fed sees no reason to publish some key information that would help confused women police this law themselves.
On the surface, the equal-credit law seems clear. A lender cannot refuse to give a woman a personal loan on her own signature, if she has enough of her own income and assets to repay.
If she does not have enough income or assets, it is perfectly legal to demand that she find a creditworthy co-signer. It needn't be her husband. Under the law, any co-signer will do. The husband must co-sign only if she offers his income and assets as loan collateral. But as a practical matter, it may turn out that only her husband is in a financial position to support the loan.
It is illegal for lenders to discriminate by marital status. If you're applying for unsecured credit, most lenders aren't even allowed to ask if you're married or not. (The question can be asked in community-property states, however, and in any state if you're applying for secured credit.)
If you are turned down for credit, you must be told why, and in writing. Under the law, you get this explanation automatically; you're not supposed to have to ask for it.
Now on to things that aren't so clear, and to corrections. (The best explanation of the FTC errors seems to be that its equal-credit expert was on maternity leave and/or that confusion struck the office of FTC Commissioner Pat Bailey.)
First, I wrote that the equal-credit law does not apply to business loans. That's wrong. It does. Under the law, a lender cannot discriminate between male and female business borrowers. But there are two protections women have as individuals that they do not have when asking for a business loan.
(1) The lender does not have to give you an automatic explanation if you're turned down for business credit. All he has to say is no. But if you know your rights, that need not be the end of it. You have 30 days to ask, in writing, for an explanation, and then the lender has to tell you. If his excuse sounds lame, you may have ground for a complaint.
(2) On a business-loan application, the lender is entitled to ask about your marital status, although discrimination based on marital status remains illegal.
Second, I want to clarify a matter relating to a husband's signature on his wife's loan. If a wife puts up jointly owned property as collateral, the lender cannot -- usually -- require the husband to sign the loan document itself. He can be asked to sign whatever releases are required by state law, so that the lender can recover from the wife's share of the property if she defaults. But he normally cannot be asked to put his own credit at risk by signing the actual loan document. It was apparently the FTC's opinion that this prohibition was absolute.
It's not. In a state where a couple holds real estate through tenancy by the entirety (a specific way of holding joint property that may be all but automatic for couples in some states), it can be hard for a lender to recover the collateral after default unless the husband also signs the loan. In those cases, says Delores Smith of the Federal Reserve, it is legal for the lender to require his signature.
Which are the states where it can be legal to ask for the husband's signature? Neither the Federal Reserve nor the FTC has that information, even though they enforce the equal-credit law. Says Smith: "I would question how much it would help women to have such a list . It would help some, but not the majority."
Not so. It would help all women to know whether, in their states, a lender has a leg to stand on if he demanded the husband's signature on the note when joint property was pledged for a wife's loan. But the government isn't going to help you find this out.
If a wife is asked for her husband's signature, she should ask, "On what?" He may have to sign a release when she pledges joint property for a loan, but he should be able to keep his name off the loan itself. If the lender wants his signature on the loan, ask for the legal authority. And then what? "Consult a local attorney," says Smith.