The Iowa Supreme Court handed down an important ruling yesterday in which the spouses of two Des Moines area real estate developers used the Equal Credit Opportunity Act (ECOA) to defeat a bank attempting to hold them responsible for personal guarantees on several million in loans. The Court found a violation of the act because there was no finding the developers were not creditworthy and therefore the bank discriminated against the spouses because maritial status was the sole reason they were forced to sign the guaranties.

The ECOA makes it unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction . . . on the basis of race, color, religion, national origin, sex, marital status, or age (provided the applicant has the capacity to contract).

As a part of its ruling the Court determined that the spouses could use the ECOA violation as an affirmative defense even though the statute of limitations for their counterclaims had run. In doing so, the Court said,

"Allowing [the spouses] to assert violations of the ECOA as affirmative defenses is not only consistent with our law dealing with illegal contracts, but is also consistent with the public policy behind the enactment of the ECOA. If we do not allow this remedy after the expiration of the two-year statute of limitations, lenders would be free to violate the law if they waited two years before trying to enforce a credit agreement. Congress did not intend for lenders to avoid the consequences of the ECOA by the mere passage of time.  Accordingly, we agree with the jurisdictions that all a creditor to use a violation of the ECOA as an affirmative defense after the two-year statute of limitations has run."

You can read the entire ruling here