contends that Mrs. Silverman lacks standing under the ECOA to pursue a claim. Alternatively, Eastrich argues that Mrs. Silverman cannot prevail because Eastrich is not an ECOA creditor and, in any event, the claim is barred by the ECOA's two-year statute of limitations.
Because only applicants are permitted to bring civil actions under ECOA, see Stern, 791 F. Supp. at 867, in order to ascertain whether Mr. Silverman has standing to maintain a claim against Eastrich, we must determine whether Mrs. Silverman qualified as an "applicant" on the date of the alleged violation.
The answer to this question hinges on our application of the Federal Reserve Board's directive published in the Federal Register regarding the effective date of the revised regulation which added guarantors to the definition of "applicant". That directive, which we quoted above, stated that the regulation was to become effective on December 16, 1985 but that creditors were not required to comply with the regulation until October 1, 1986. 50 Fed. Reg. 48,018.
In light of the perplexing nature of the directive and the parties' conflicting interests, it is not surprising that Mrs. Silverman contends that the regulation became effective on December 16, 1985 and Eastrich insists that it was not effective until October 1, 1986. If Mrs. Silverman is correct and the operative date is December 16, 1985, Mrs. Silverman was an "applicant" on February 26, 1986. On the other hand, if Eastrich is correct and the regulation did not become effective until October 1, 1986, then Mrs. Silverman was not an "applicant" on the date of the alleged violation and lacks standing to pursue a claim on the 1986 guaranty.
We have found little caselaw to guide us in our resolution of the paradoxical effective date(s) published in the Federal Register. In its brief, Eastrich cites Boatmen's First National Bank v. Koger, 784 F. Supp. 815 (D. Kan. 1992), a case which holds that "compliance with the revised Regulation B was not mandatory until October 1, 1986". 784 F. Supp. at 816. The court in Koger, however, did not even acknowledge the existence of the earlier and apparently conflicting date. Id. We therefore find Koger to be unhelpful.
Furthermore, as the following analysis will show, a close examination of the 1985 revisions to Regulation B makes clear that (1) the two dates in the Federal Register can be reconciled and (2) the new definition's effective date was December 16, 1985.
The Federal Reserve Board made two types of changes to Regulation B in 1985, "procedural" and "substantive". 50 Fed. Reg. 48,018. The procedural changes, for the most part, required creditors to institute operational changes.
In contrast, the substantive changes did "not require changes in operational procedures". Id. The new definition of "applicant" falls into the latter category. In fact, the Federal Register entry specifically states that "the revised definition of applicant gives legal standing to guarantors and like parties (enabling them to sue for violations of the regulation's signature rules) but imposes no new requirements on creditors."
50 Fed. Reg. 48,018 (emphasis added).
Once we understand that some of the revisions required creditors to change their procedures and others did not, the rationale behind, and function of, the two dates becomes apparent. The only logical way to reconcile the two dates is to recognize that the earlier date, December 16, 1985, was the official date for the revisions to go into effect, but the Federal Reserve Board provided creditors with a grace period until October 1, 1986 to institute the new operational procedures necessary to comply with the procedural changes.
Applying the Federal Reserve Board's apparent logic, we note that because the change in the definition of "applicant" "imposed no new requirements on creditors", it did not require creditors to alter their procedures and could go into effect on December 16, 1985 without causing creditors any inconvenience. We therefore find that the new definition went into effect on December 16, 1985, and thus Mrs. Silverman qualified as an "applicant" in February of 1986, thereby conferring standing on her to bring a claim arising out of the February 26, 1986 guaranty.
ii. Statute of Limitations
Having concluded that Mrs. Silverman has the requisite standing to maintain a claim for the events occurring on February 26, 1986, we nevertheless find that the two year statute of limitations on ECOA claims bars that claim.
See 15 U.S.C. § 1691e(f).
The parties do not dispute that Mrs. Silverman's claim as to the February 26, 1986 guaranty accrued when she signed the guaranty.
See Riggs National Bank v. Webster, 832 F. Supp. 147, 151 (D. Md. 1993); Stern, 791 F. Supp. at 868. The statute of limitations therefore expired two years after that date, on February 26, 1988, and Mrs. Silverman's May 9, 1994 filing of the instant action fell far outside of the statutory period. Accordingly, her claim on the original 1986 guaranty is time-barred.
Nevertheless, Mrs. Silverman argues that even if the statute of limitations bars an affirmative claim for damages under the ECOA, it does not bar a claim based on her right of recoupment. In support of this position, she cites Integra Bank v. Freeman, 839 F. Supp. 326 (E.D. Pa. 1993), a case in which the court permitted a defendant to assert an alleged ECOA violation as a defense to liability. Even though the statute of limitations had run on the affirmative ECOA claim in that case, the court found that the defensive ECOA claim was not time-barred because recoupment claims are "never barred by the statute of limitations so long as the main action itself is timely." Id. at 330 (quoting Bull v. United States, 295 U.S. 247, 262, 55 S. Ct. 695, 700-01, 79 L. Ed. 1421 (1935)). The court reasoned that "to permit creditors - especially sophisticated credit institutions - to affirmatively benefit by disregarding the requirements of the ECOA would seriously undermine the Congressional intent to eradicate gender and marital status based credit discrimination." 839 F. Supp. at 329.
The Court in Integra Bank also noted, however, that other courts "that have confronted the issue of whether an ECOA violation can be asserted defensively . . . have determined that an ECOA violation - if proved - does not render the offending instrument void." Id. at 329 (citing Diamond v. Union Bank & Trust, 776 F. Supp. 542, 544 (N.D. Okla. 1991); CMF Virginia Land, L.P. v. Brinson, 806 F. Supp. 90 (E.D. Va. 1992)). As one court stated:
The ECOA, by its own terms, sets forth the contemplated remedy under the statute - a federal civil action for actual damages, punitive damages not to exceed $ 10,000, attorneys' fees or injunctive relief. Nowhere does it afford relief by way of an affirmative defense.