Equality in Credit Decisions – “Sex” DOES include Sexual Orientation and Gender Identity

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In 2020, the Supreme Court held in Bostock v. Clayton County, Georgia that an employer who fires an employee for being gay or transgender violates the Civil Rights Act of 1964 (“Title VII”). Though the list of protected classes covered by Title VII does not expressly include sexual orientation or gender identity, the Court found that firing an employee for being gay or transgender constituted discrimination based upon the person’s sex. The Equal Credit Opportunity Act (“ECOA”) and Regulation B likewise prohibit discrimination on the basis of sex. Following Bostock, many wondered whether the holding would extend to the ECOA and Regulation B.

Today we can answer that yes, “sex” does include sexual orientation and gender identity under the ECOA and Regulation B. On March 5, 2021, the Acting Director of the Bureau of Consumer Financial Protection (“Bureau”), issued an interpretive rule clarifying that ECOA and Regulation B’s prohibition against sex discrimination extends to discrimination on the basis of sexual orientation and gender identity. In reaching this conclusion, the Bureau noted that ECOA and Title VII are usually interpreted consistently with one another. The ECOA, like Title VII, prohibits discrimination on the basis of sex. And discrimination based on sexual orientation or gender identity “necessarily involve consideration of sex.” The Bureau also noted that neither ECOA nor Regulation B require that discrimination based on sex be the sole or primary reason for the discriminatory action – only that the applicant’s sex be a reason. Further, like the Court in Bostock, the Bureau found that the ECOA and Regulation B do not require discrimination on a group-basis – e.g., refusing to grant credit to all persons identified as male at birth. Instead, the ECOA and Regulation B are also violated when an individual applicant is denied based on their biological sex.

Originally published in the Spring 2021 issue of Tennessee Dealer News.

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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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