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Financial Services Law Insights and Observations

CFPB: Lenders cannot discriminate on the basis of sexual orientation or gender identity

Federal Issues CFPB ECOA Regulation B Fair Lending

Federal Issues

On March 9, the CFPB issued an interpretive rule to clarify that ECOA’s prohibition against sex discrimination includes sexual orientation and gender identity discrimination. “This prohibition also covers discrimination based on actual or perceived nonconformity with traditional sex- or gender-based stereotypes, and discrimination based on an applicant’s social or other associations,” the Bureau stated. In 2020, the U.S. Supreme Court issued a decision in Bostock v. Clayton County, Georgia, holding that “the prohibition against sex discrimination in Title VII of the Civil Rights Act of 1964 encompasses sexual orientation discrimination and gender identity discrimination.” Following the Court’s decision, the Bureau issued a request for information (RFI) seeking, among other things, feedback on ways to provide clarity under ECOA and/or Regulation B related to the prohibition of discrimination on the basis of a sexual orientation or gender identity. (Covered by InfoBytes here.) Consistent with the Bostock decision and supported by many comments received in response to the RFI, the Bureau issued the interpretive rule to address any regulatory uncertainty that may still exist regarding the term “sex” under ECOA/Regulation B in order to protect against discrimination and ensure fair, equitable, and nondiscriminatory access to credit for both individuals and communities. The interpretive rule is effective upon publication in the Federal Register.

The Bureau also announced plans to review—and update as needed—publication and examination guidance documents to reflect the interpretive rule, and intends to take appropriate enforcement action against financial institutions that violate ECOA.

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