CFPB builds case for ECOA protection for gender identity and sexual orientation

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While CFPB officials have suggested in public remarks that the Equal Credit Opportunity Act’s prohibition against discrimination on the basis of “sex” includes discrimination based on gender identity and sexual orientation, a letter dated August 30, 2016 from Director Cordray goes further by describing how, in the CFPB’s view, current law provides strong support for that position.  To our surprise, Director Cordray’s letter does not appear to be available on the CFPB’s website and there has been little reporting about it.

Even prior to Director Cordray’s letter, it came to our attention that the CFPB had been asking entities it supervises about how they incorporate sexual orientation and gender identity into their policies, procedures, and fair lending analyses.  By signaling that discrimination on the basis of gender identity and sexual orientation will be a focus of CFPB fair lending supervision and enforcement going forward, Director Cordray’s letter raises the potential stakes for bank and non-bank creditors. 

Director Cordray’s letter was sent in response to a letter from Services and Advocacy for GLBT Elders (SAGE) in which SAGE posed the question “whether the [CFPB] views credit discrimination on the bases of gender identity and sexual orientation, including but not limited to discrimination based on actual or perceived nonconformity with sex-based or gender-based stereotypes, as forms of sex discrimination prohibited under the [ECOA].”

In describing the CFPB’s “current thinking about how the law is continuing to evolve in this area,” Director Cordray sets forth the CFPB’s understanding of the terms “gender identity” and “sexual orientation.”  He states that the CFPB understands (1) “gender identity” to refer to “one’s internal sense of one’s own gender, which may or may not correspond to the sex that is assigned to a person at birth, and which may or may not be made visible to others,” and (2) “sexual orientation” to refer to “an individual’s physical, romantic, and/or emotional attraction to people of the same and/or opposite gender, such as straight (or heterosexual), lesbian, gay, or bisexual.”  (Director Corday notes that the CFPB’s understanding of these terms is consistent with Department of Labor guidance.)

Director Cordray concludes that the “current state of the law supports arguments that the prohibition of sex discrimination in ECOA and Regulation B affords broad protection against credit discrimination on the bases of gender identity and sexual orientation, including but not limited to discrimination based on actual or perceived nonconformity with sex-based or gender-based stereotypes.”  In reaching that conclusion, he cites to Title VII cases involving alleged employment-related discrimination on the basis of sex and observes that “[i]n recent years, courts have increasingly concluded that the statutory proscriptions on sex discrimination [in Title VII] encompass discrimination motivated by perceived nonconformity with sex-based or gender-based norms, preferences, expectations, principles, or stereotypes, including those related to gender identity and sexual orientation.”

According to Director Cordray, there is “no apparent reason” why the reasoning used under Title VII “would not equally apply” to sex-based discrimination under the ECOA.  He cites to a 2000 First Circuit case as “clear precedent that gender identity claims can be brought under ECOA.”  In addition, he asserts that discrimination based on sexual orientation falls within the “principle of associational discrimination” under the ECOA, which prohibits creditors “from discriminating against applicants based on the sex of the people with whom an applicant is affiliated or with whom an applicant associates, or because of the sex of the people with whom an applicant has business dealings.”

Director Cordray’s letter also discusses Equal Employment Opportunity Commission decisions involving alleged employment-related discrimination on the basis of gender identity and sexual orientation in which “the EEOC has laid out its reasoning about how discrimination on these bases necessarily involves sex-based considerations.”   He deems the EEOC’s views of what constitutes sex-based discrimination under Title VII “highly relevant to the similar statutory analysis of what it means to discriminate based on ‘sex’ under ECOA.”

Most significantly, Director Cordray comments that the CFPB “recognizes and supports these recent developments in the law,” and regards them as “important and relevant to ensuring fair, equitable, and nondiscriminatory access to credit for both individuals and communities.”  His statement that the CFPB intends to strive to ensure that it interprets the ECOA and Regulation B in a manner that “appropriately reflect[s] the evolving precedents interpreting sexual discrimination law” leaves little doubt that the CFPB intends to apply ECOA protections to gender identity and sexual orientation discrimination.   Indeed, Director Cordray ends his letter by expressing the CFPB’s interest in knowing about “any situations in which creditors treat applicants less favorably because of gender identity or sexual orientation” or “if any creditors impose obstacles on transgender applicants who may submit applications designating their sex consistent with their gender identity.”


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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