On March 9, 2021, the Consumer Financial Protection Bureau (CFPB or Bureau) issued an Interpretive Rule that the prohibitions against sex discrimination in the Equal Credit Opportunity Act (ECOA) and Regulation B encompass sexual orientation discrimination and gender identity discrimination. When published, the rule will have immediate effect.

The new interpretive rule follows a landmark Supreme Court decision in June of last year in which the court ruled that the Civil Rights Act’s ban on sex discrimination also encompasses sexual orientation and gender identity discrimination. The CFPB said the rule clarifies its 2016 statement asserting that both types of discrimination fall under protections afforded by the ECOA. Under the ECOA, banks and lenders are prohibited from rejecting, discouraging, or applying inconsistent standards to customers seeking credit products or loans because of their sex, even if the firm cited other reasons for differing treatment.

“In issuing this interpretive rule, we’re making it clear that lenders cannot discriminate based on sexual orientation or gender identity,” CFPB Acting Director David Uejio said in a statement. “The CFPB will ensure that consumers are protected against such discrimination and provided equal opportunities in credit.”

The Interpretive Rule provides some insight into the types of activities that the CFPB will identify as instances of sexual orientation and gender identity discrimination. The Interpretive Rule clarifies that discrimination against individuals, not merely groups, is covered by ECOA and Regulation B. This point is illustrated by a hypothetical loan officer who rejects applications from insufficiently masculine male applicants and insufficiently feminine female applicants. According to the CFPB, this loan officer may be treating men and women as groups equally but is discriminating against individuals. The Interpretive Rule states that sex discrimination also includes “discrimination motivated by perceived nonconformity with sex-based or gender-based stereotypes.” This includes discrimination based on a lender’s perception that a customer’s attire does not accord with the customer’s gender.

Uejio stated further, “The CFPB will take enforcement action under ECOA to hold financial institutions accountable for their actions that violate ECOA. The CFPB also looks forward to working with Congress on the Equality Act, which, if enacted, would codify protections for consumers against sexual orientation and gender identity discrimination in all financial products and services.”

The Department of Housing and Urban Development also announced last month that it will apply the Fair Housing Act, which also bans sex-based discrimination, to LGBTQ individuals.