CFPB Interpretive Rule Expands ECOA Protections

Earlier this month the, the CFPB issued an interpretive rule expanding the protections in the Equal Credit Opportunity Act (ECOA) found in Regulation B. As a reminder, these protections include discrimination on the basis of race, color, religion, national origin, sex, marital status, age, the fact that the applicant’s income (in whole or part) derives from public assistance, or whether the applicant has exercised any rights under the Consumer Credit Protection Act. In the recent issued interpretive rule, the CFPB expanded the prohibitions against sex discrimination to include discrimination based on sexual orientation or gender identity, including actual or perceived nonconformity with traditional sex-based or gender-based stereotypes, and discrimination based on an applicant’s social or other associations.

Because the CFPB’s rule is interpretive, it is not subject to any delays, is not subject to the normal notice-and-comment period, and will become effective when it is published in Federal Register. It is also important to note that this rule did not change the wording in the regulation itself, but merely broadened the interpretation of the meaning of word “sex” as it is used in Regulation B.

For the background and history on the change made by the interpretive rule, in 2016, in response to an inquiry the CFPB indicated that ECOA and Regulation B supported arguments that the prohibition against sex discrimination also included protections from discrimination based on an applicant’s sexual orientation and gender identity. In June 2020, the U.S. Supreme Court issued a decision in Bostock v. Clayton County, Georgia, finding that the prohibition against sex discrimination in the Civil Rights Act of 1964 encompassed both sexual orientation and gender identity discrimination. In July 2020, the CFPB issued a Request for Information (RFI) to solicit comments and help identify opportunities to prevent discrimination, and asked whether the Bostock decision should affect the CFPB’s interpretation of ECOA.

The CFPB has stated that they will review their publications and examination guidance documents and, if needed, update these materials to reflect this interpretive rule. The CFPB has also noted that they will take enforcement action, when necessary, to hold financial institutions accountable for their actions that violate ECOA. 

In response to the CFPB’s expansion of the protections under ECOA found in Regulation B, it may be a good idea for banks to reevaluate their ECOA/Regulation B policies to accommodate for these changes. The extent of the changes to the bank’s policies would be up to the bank and each bank’s desire for the need for clarification. Stating in your polices that the bank does not discriminate on the basis of sex is technically all that should be necessary and should be compliant. However, some banks will no doubt want to show compliance with the interpretive rule by adding language to their policies to reflect the changes in interpretation. Compliance Alliance is working to update our Regulation B policy to address these changes, and the updated tool will be posted on our website and a notification will be included in our daily e-mail when our policy is updated.