The CFPB may seek to rely on a recent Seventh Circuit employment discrimination case to support its view that the Equal Credit Opportunity Act’s (ECOA’s) prohibition against discrimination on the basis of “sex” includes discrimination based on sexual orientation.

In Hively v. Ivy Tech Community College of Indiana, the court held that Title VII of the Civil Rights Act of 1964 prohibits employment discrimination against individuals because of their sexual orientation.  The court also concluded there was no difference between discrimination based on gender nonconformity—which the U.S. Supreme Court held in Price Waterhouse v. Hopkins nearly thirty years ago was actionable under Title VII—and sexual orientation. In addition, the court drew parallels to associational discrimination, which was held to be unlawful in Loving v. Virginia, and which is likewise considered to violate the ECOA and Regulation B.

Since at least last year, the CFPB has signaled that discrimination on the basis of gender identity and sexual orientation might be a focus of fair lending supervision and enforcement.  Director Cordray indicated as much in a 2016 letter to the organization SAGE (Services & Advocacy for GLBT Elders).  The letter, which we wrote about here, discussed Price Waterhouse and other Title VII cases and noted that Title VII precedents traditionally guide judicial interpretation of ECOA and Regulation B.

With Hively, the Seventh Circuit becomes the first circuit court of appeals to conclude that an employment discrimination claim may be brought on the basis of sexual orientation, although that position has not been endorsed in other circuits.  In March, the Eleventh Circuit held in Evans v. Georgia Regional Hospital that gender non-conformity claims are distinct from claims based on sexual orientation and that sexual orientation claims are not actionable under Title VII.

Also in March, a three-member panel of the Second Circuit issued an opinion in Christiansen v. Omnicom Group, Inc., in which it declined to hold that Title VII encompasses discrimination based on sexual orientation, citing its lack of authority to reconsider an en banc decision to the contrary handed down in 2000, Simonton v. Runyan.  The plaintiff in the Christiansen case has until April 28 to file a petition for rehearing en banc.

Notwithstanding this circuit split, in light of the SAGE letter and Hively, we would encourage supervised entities to consult with their counsel and to consider revising their policies, procedures and fair lending analyses to incorporate discrimination based on sexual orientation.  In doing so, supervised institutions should also be mindful of the fact that numerous state laws already prohibit discrimination in credit transactions on the basis of sexual orientation and gender identity.