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CFPB extends credit protections to LGBTQ

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The Consumer Financial Protection Bureau (CFPB) on Tuesday issued an interpretive rule clarifying that the prohibition against sex discrimination under the Equal Credit Opportunity Act (ECOA) and Regulation B includes sexual orientation and gender identity .

The CFPB specifically called out actual or perceived nonconformity with traditional sex- or gender-based stereotypes, and discrimination based on an applicant’s social or other associations.

“In issuing this interpretive rule, we’re making it clear that lenders cannot discriminate based on sexual orientation or gender identity,” said CFPB Acting Director David Uejio in a statement. “The CFPB will ensure that consumers are protected against such discrimination and provided equal opportunities in credit.”

“While the Consumer Financial Protection Bureau previously had a track record of reading the ECOA’s sex discrimination protections to apply to LGBTQ people, this explicit interpretive rule renews and formalizes that commitment,” said Karen Loewy, senior counsel and seniors strategist at Lambda Legal. “This rule sends a clear message to all kinds of lenders – from giant banks and credit unions to payday lenders and mortgage brokers – that discriminating against LGBTQ people is off limits.”

“Research on LGBT people’s experiences with credit discrimination is limited—in part because creditors are not currently required by the Bureau to collect data specifically on applicants’ sexual orientation or gender identity,” said Christy Mallory, legal director at the Williams Institute. “It is important that CFPB require creditors to collect this information in order to address possible discrimination against LGBT applicants.”

According to the Williams Institute:

  • Compared to different-sex borrowers of similar profiles, same-sex borrowers experienced a 3% to 8% lower approval rate.
  • Among the loans approved, same-sex borrowers were charged higher interest and/or fees, equivalent to between $8.6 million and $86 million more in interest and fees over time.
  • Additional evidence suggests that LGBTQ people often encounter challenges while attempting to buy homes—including discrimination. An analysis of data found that 15% of LGB people report being prevented from moving into or buying a house compared to 6% of heterosexual people.
  • LGBT adults are more likely to be renters than non-LGBTQ adults: An estimated 50% of LGBTQ adults own their own homes compared to 70% of non-LGBT adults. Homeownership is even lower among LGBTQ racial minorities and transgender people.
  • Same-sex couples are less likely to own their homes than different-sex couples (64% and 75%, respectively).

CFPB said the rule is consistent with the U.S. Supreme Court’s Bostock decision and supported by public comments. The agency will review and update its publications and examination guidance documents.

“The CFPB also looks forward to working with Congress on the Equality Act, which, if enacted, would codify protections for consumers against sexual orientation and gender identity discrimination in all financial products and services,” the agency stated.

To read the interpretive rule, click here: https://files.consumerfinance.gov/f/documents/cfpb_ecoa-interpretive-rule_2021-03.pdf 

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