Dear Boards of Directors and Chief Executive Officers:
On March 16, 2021, the Consumer Finance Protection Bureau (CFPB) published in the Federal Register an interpretive rule (opens new window) clarifying that the prohibition against sex discrimination in the Equal Credit Opportunity Act (ECOA), as implemented by Regulation B, encompasses discrimination based on sexual orientation and gender identity discrimination.1 The interpretive rule also covers discrimination based on actual or perceived nonconformity with sex- or gender-based stereotypes, and discrimination based on an applicant’s associations. The interpretive rule became effective on March 16, 2021.
The CFPB stated the interpretive rule is consistent with the 2020 United States Supreme Court ruling in Bostock v. Clayton County, Georgia, that holds the prohibition against sex discrimination in Title VII of the Civil Rights Act of 1964 encompasses sexual orientation discrimination and gender identity discrimination.2
The interpretive rule clarifies that ECOA and Regulation B cover discrimination against individuals, not merely groups. It also states that sex discrimination includes discrimination motivated by actual or perceived nonconformity with sex- or gender-based stereotypes, such as discrimination based on a lender’s perception that a customer’s attire does not accord with the customer’s perceived gender.
Some state laws already prohibit discrimination in credit transactions based on sexual orientation or gender identity. Credit unions should ensure their policies, procedures, and training materials promote compliance with ECOA and Regulation B consistent with the interpretive rule. Credit unions should also review automated scoring, decisioning, and pricing models for variables that could be proxies for these prohibited bases.
If you have questions about the information in this Regulatory Alert, please contact the NCUA’s Office of Consumer Financial Protection at 703.518.1140 or ComplianceMail@ncua.gov. You can also contact your NCUA regional office or your state supervisory authority.
Todd M. Harper
1 12 C.F.R. §§ 1002.2(z) and 1002.4(a)-(b).
2 The Supreme Court held in Bostock, 140 S. Ct. 1731, 207 L. Ed. 2d 218 (2020), that an employer who fires an employee for being gay or transgender violates the Civil Rights Act of 1964 (Title VII). Title VII prohibits employers from refusing to hire, firing, or otherwise discriminating against any individual because of the individual’s race, color, religion, sex, or national origin. Though the list of protected classes covered by Title VII does not expressly include sexual orientation or gender identity, the Supreme Court found that firing an employee for being gay or transgender constituted discrimination based on sex.