SCOTUS Grimm decision could impact CFPB position on ECOA protection for gender identity and sexual orientation

by Ballard Spahr LLP
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On October 28, 2016, the U.S. Supreme Court granted the petition for a writ of certiorari in Grimm v. Gloucester County School Board, a decision of the U.S. Court of Appeals for the Fourth Circuit that marked the first time that a federal court of appeals has held that a transgender student could state a claim under Title IX when he alleges that his school denied him access to the bathroom that corresponds with his gender identity.  The CFPB is likely to use a decision by the Supreme Court that concludes the Title IX prohibition against discrimination on the basis of “sex” includes discrimination based on gender identity as support for making discrimination on the basis of gender identity and sexual orientation a focus of CFPB fair lending supervision and enforcement.

As we reported, Director Cordray sent a letter dated August 30, 2016 that responded 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].”

Director Cordray concluded 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 cited 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.”

The issue before the Fourth Circuit in Grimm was whether the Department of Education’s unpublished interpretation of Title IX and a Department regulation permitting certain sex-separated facilities was entitled to deference.  The Department had interpreted Title IX and its regulation to mean that a recipient of Title IX funding providing sex-separated facilities must “generally treat transgender students consistent with their gender identity.”  According to the Fourth Circuit, the district court “reasoned that Title IX prohibits discrimination on the basis of sex and not on the basis of other concepts such as gender, gender identity, or sexual orientation,” and dismissed the complaint because it found that the Department’s interpretation was not entitled to deference.  Noting that it looked “to case law interpreting Title VII of the Civil Rights Act of 1964 for guidance in evaluating a claim brought under Title IX,” the Fourth Circuit reversed the district court and concluded that the Department’s interpretation was valid and entitled to deference.

In addition to the question of whether “courts should extend deference to an unpublished agency letter,” the Supreme Court granted certiorari as to the question of whether the Department’s interpretation “with or without deference to the agency…should be given effect.”  Thus, it seems likely that a decision on the merits by the Supreme Court will include whether the Title IX prohibition against discrimination on the basis of “sex” includes discrimination based on gender identity.  We would expect a decision by the Supreme Court holding that discrimination based on gender identity constitutes discrimination based on “sex” under Title IX, particularly if it relies on Title VII decisions, to further embolden the CFPB’s efforts to extend ECOA protections to gender identity and sexual orientation.

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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