How should we document joint intent to apply at the time of application as required under Regulation B for commercial and agricultural loan applications that are taken over the phone? Is it adequate to document joint intent with a credit memo that states who the borrowers and guarantors are? Additionally, if we properly document joint intent to apply, should we still obtain signatures evidencing the intent at closing?

We believe that your bank may document joint intent by asking each joint applicant if he or she intends to apply for joint credit and then documenting each joint applicant’s intent once confirmed.

Regulation B requires you to evidence each applicant’s intent to be a joint applicant “at the time of application” before requiring their signatures on a credit instrument. However, Regulation B does not specify any particular methods that must be used to document joint intent. The Regulation B official interpretations state that “signatures or initials on a credit application affirming applicants’ intent to apply for joint credit may be used,” but signatures and initials are not required. Additionally, “the method used to establish intent must be distinct from the means used by individuals to affirm the accuracy of information.”

Furthermore, when the Federal Reserve Board originally adopted Regulation B’s joint intent requirements in 2003, it clarified that “written applications for business credit are not required,” and “while creditors are required to have documentation evidencing intent to apply for joint credit, creditors have the flexibility to determine the methods used to establish intent.”

Consequently, we believe that you may document each applicant’s intent to apply for joint credit by asking applicants whether they intend to apply for joint credit and documenting the conversation in which the applicants stated their intent to apply for joint credit. You may also wish to obtain a written statement from the applicants expressing their intent to apply for joint credit that you can place in their file. However, we do not believe that a credit memo stating who the borrowers and guarantors are would adequately document joint intent, as it does not expressly reference the applicants’ intent to apply for joint credit, and it is not clear whether the credit memo would be provided “at the time of the application”.

We do not believe that you need to obtain the applicants’ signatures to evidence intent to apply for joint credit at the loan closing. Regulation B requires joint intent to apply to be evidenced only at the time of application.

For resources related to our guidance, please see:

Regulation B, 12 CFR 1002.7(d)(1) (“Rule for qualified applicant. Except as provided in this paragraph, a creditor shall not require the signature of an applicant’s spouse or other person, other than a joint applicant, on any credit instrument if the applicant qualifies under the creditor’s standards of creditworthiness for the amount and terms of the credit requested. A creditor shall not deem the submission of a joint financial statement or other evidence of jointly held assets as an application for joint credit.”)

Regulation B, Official Interpretation, Paragraph 1002.7(d)(1), Comment 3 (“A person’s intent to be a joint applicant must be evidenced at the time of application. Signatures on a promissory note may not be used to show intent to apply for joint credit. On the other hand, signatures or initials on a credit application affirming applicants’ intent to apply for joint credit may be used to establish intent to apply for joint credit. (See appendix B.) The method used to establish intent must be distinct from the means used by individuals to affirm the accuracy of information. For example, signatures on a joint financial statement affirming the veracity of information are not sufficient to establish intent to apply for joint credit.”)

Final Rule, Federal Reserve System, Regulation B, 68 Fed. Reg. 13143, 13156 (March 18, 2003) (“Comment 7(d)(1)-3 provides guidance on how to evidence applicants’ intent to apply for joint credit. The proposed rule clarified that creditors must document in some manner a person’s intent to become jointly liable for a credit obligation, and provided examples. . . .
Written applications for business credit are not required, nor has the Board proposed to require such applications. While creditors are required to have documentation evidencing intent to apply for joint credit, creditors have the flexibility to determine the methods used to establish intent. . . .”)
FDIC, Guidance On Regulation B Spousal Signature Requirements (January 13, 2004) (“Where there is no written application, the applicants' intent to apply for joint credit may be evidenced, for example, by the presence in the file of a written statement by the applicants that expresses such an intent.”) (Note that this guidance comes from FDIC, Financial Institution Letter, FIL-6-2004 (January 13, 2004), which was made inactive on December 1, 2018.)