Members of the US Senate Banking Committee recently introduced a bill to create the Fair Access Financial Services Act of 2020, which is aimed to make any practice of discrimination by a financial institution on the grounds of the consumer’s race, color, religion, national origin, or sex (including sexual orientation and gender identity) expressly illegal.
The bill’s proponents view it as necessary to fill a void in regulatory coverage due to judicial decisions that narrowly read the federal Civil Rights Act of 1964 as not reaching financial institutions. Although state antidiscrimination laws typically reach financial services providers, a number of states have weaker (or no) laws in this area or do not prioritize enforcement of such laws against financial institutions. Further, existing antidiscrimination law in this area often focuses narrowly on whether a consumer was denied or treated differently in connection with a credit transaction, meaning that it is currently difficult for consumers to obtain redress for discriminatory actions by financial companies outside of the lending context.
The proposed bill provides that “all persons shall be entitled to the full and equal enjoyment of the goods, services, facilities, privileges, and accommodations of any financial institution.” Senator Sherrod Brown, one of the bill’s sponsors, remarked that “[t]oo many Black and brown Americans experience racial profiling and unequal treatment when trying to access services at banks and other financial institutions” and that “[v]ictims of discrimination are not even able to hold financial institutions accountable—it is shameful.”
The bill defines “financial institution” in line with other federal legislation that reaches more than just big banks and credit unions, but also broker-dealers and investment advisers, insurance companies, investment companies, and “any company engaged in activities that are financial in nature or incidental to a financial activity.”
Further, the bill provides for a private right of action for preventative relief, including an injunction, from a federal court and the recoupment of reasonable legal fees. A complementary bill is expected to be introduced soon in the US House of Representatives.
- Whether or not this legislation is enacted, financial institutions should consider revisiting their policies and procedures for preventing discrimination on prohibited bases under federal and state laws.
- With its broad definition of “financial institution,” the bill’s antidiscrimination provision potentially could reach smaller financial service providers, including fintechs. In addition, the scope of financial activities covered is broader than that of other laws such as the Equal Credit Opportunity Act. With the legislation’s focus on fair “access” to financial services, virtually all phases of interaction between consumers and financial companies conceivably could be covered.
- If the law is enacted, the inclusion of a private right of action for injunction and reasonable attorney fees could serve as a strong incentive for plaintiffs’ attorneys to seek out potentially violative conduct on the part of financial companies of all sizes and to bring such actions on a consolidated basis, including through class actions.