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CFPB vows to protect LGBTQ borrowers under ECOA

Clarifies protections against discrimination due to sex-based and gender-based stereotypes

The Consumer Financial Protection Bureau (CFPB) announced Tuesday it will be watching out for any potential lending discrimination based on sexual orientation or gender identity, vowing to protect LGBTQ borrowers.

The CFPB issued an interpretive rule that said the Equal Credit Opportunity Act, which outlaws discrimination in lending and credit decisions, includes protection against discrimination due to sex-based and gender-based stereotypes against the LGBTQ community.

The clarification follows a landmark decision made in the June 15, 2020, court case Bostock v. Clayton County, Georgia, that deemed the prohibition against sex discrimination in Title VII of the Civil Rights Act of 1964 encompasses sexual orientation discrimination and gender identity discrimination.

The CFPB noted prior to the issuance of the Bostock hearing, at least 20 states and the District of Columbia prohibited discrimination on the bases of sexual orientation and/or gender identity either in all credit transactions or in certain credit transactions, including housing-related negotiations.

“The Bureau is issuing this interpretive rule to address any regulatory uncertainty that may still exist under ECOA and Regulation B as to the term ‘sex’ so as to ensure the fair, equitable and nondiscriminatory access to credit for both individuals and communities and to ensure that consumers are protected from discrimination,” the CFPB said in its interpretive rule release.

In response to its immediate enforcement, Ryan Weyandt, founder and CEO of the LGBTQ+ Real Estate Alliance applauded the CFPB’s reaffirmation of the White House’s stance on a zero-tolerance policy regarding discrimination.

“Our community, until now, has been too easily subjected to personal hate and historical bias allowed by both the Fair Housing Act and fair lending guidelines,” Weyandt said.  “As a former mortgage banker and professional for nearly a decade, this is a welcome change of pace. Our (LGBTQ+) community holds over $1T in purchase power according to the National LGBT Chamber of Commerce. Why anyone would want to block that potential is mind boggling.”

“This clarification knocks down barriers which have been in place for LGBTQ+ folks to obtain financing, and as a result, start building generational wealth for the families we’ve only legally been able to form since 2015,” Weyandt continued.

In February, the Department of Housing and Urban Development took a similar stance as the CFPB, announcing it will administer and enforce the Fair Housing Act to prohibit discrimination on the basis of sexual orientation and gender identity.

In a memorandum, HUD noted the policy set forth in President Joe Biden’s Executive Order 13988, which directed executive branch agencies to “examine further steps that could be taken to combat such discrimination.”

Research published in April 2019 by from Iowa State University’s Ivy College of Business said lenders have been less likely to approve same-sex couples seeking home loans, and, analyzing national mortgage data from 1990 to 2015, researchers found the approval rate for same-sex applicants was 3% to 8% lower than different-sex couples. 

The study also said that same-sex couples who were approved for mortgages paid 0.02%-0.2% more, equivalent to a total of $8.6 million to as much as $86 million annually, in additional interest and fees, compared to non-LGBT borrowers.

“As a gay mortgage professional, this is an issue I have worked on for years and am very happy to see this decision. As president of National Association of Mortgage Brokers, I applaud the CFPB on issuing this ruling,” said Kimber White. “The LGBTQ+ community has experienced discrimination in housing and this clarification now gives the community equality instead.”

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