A newly effective CFPB Interpretive Rule expands the scope of the Equal Credit Opportunity Act (ECOA) and Regulation B to encompass sexual orientation discrimination and gender identity discrimination. Creditors and others are prohibited from discriminating against consumers based on these characteristics. The prohibition applies to discrimination based on actual or perceived nonconformity with sex-based or gender-based stereotypes and discrimination based on an applicant's associations.
Of the nine prohibited bases set out in the ECOA, seven relate to certain characteristics of consumers: gender, race, color, religion, national origin, marital status, and age. While the ECOA does not define the prohibited basis "sex," the Bureau stated that sexual orientation discrimination and gender identity discrimination necessarily involve consideration of sex. The Interpretive Rule clarifies that the prohibited basis of "sex" includes these factors — and potential proxies for these factors — within the scope of ECOA and Regulation B.
The Bureau builds on the Supreme Court's decision in Bostock v. Clayton County, Georgia, and keys the Interpretive Rule to the considerations set out by the Court. The Bureau notes that its interpretation follows at least twenty states and the District of Columbia in prohibiting discrimination on the bases of sexual orientation and/or gender identity.
According to the Bureau's discussion in the Interpretive Rule, lenders may not discriminate on the basis of sex, even if the lender treats men and women equally. Such discrimination could take many forms, including any "perceived nonconformity with sex-based or gender-based stereotypes" such as an applicant's:
- Appearance; or
- Associations (e.g., spouses, domestic partners, dates, friends, coworkers).
The Interpretive Rule is effective as of March 16, 2021.
While the Bureau sets about updating guidance and examination materials, creditors and other industry participants should consider policy, procedure, and training updates as needed to address the Interpretive Rule.