In a landmark case last week, the Supreme Court held in Bostock v. Clayton Co., Ga. that the prohibition on sex-based discrimination in employment is violated when an employee is fired on the basis of homosexuality or transgender status.  This article briefly explains why that decision, based on Title VII of the Civil Rights Act of 1964 (“Title VII”), very likely means that the federal fair lending laws, too, will be read to protect homosexual and transgender individuals — specifically, loan applicants.   The federal fair lending laws are the Equal Credit Opportunity Act (“ECOA”) and the Fair Housing Act (the “FH Act”).  Indeed, Justice Alito’s dissent in Bostock predicts that the Court’s decision “is virtually certain to have far-reaching consequences,” pointing to specifically to ECOA and the FH Act.  Slip Op. at 44.

This article also sketches out the probable impact of this expansion of fair lending coverage, on both consumer and business lending practices (ECOA’s anti-discrimination provisions apply equally to business-purpose loans, and the FH Act applies to loans for multi-family housing).  That impact could be more significant depending on the outcome of the election this fall, and on who thereafter is in charge of the Consumer Financial Protection Bureau (“CFPB”) and other federal agencies.

A.        Bostock

In Bostock, the Court held that because Title VII outlaws sex-based discrimination, “employers are prohibited from firing employees on the basis of homosexuality or transgender status.”  The Court explained that:

An employer who fires an individual for being ho­mosexual or transgender fires that person for traits or ac­tions it would not have questioned in members of a different sex.  Sex plays a necessary and undisguisable role in the decision, exactly what Title VII forbids.

Slip Op. at 2, 30.

The Bostock Court’s reasoning in reaching this result under Title VII strongly indicates that courts may reach the same result under the two fair lending laws.  This is not only because the one, statutorily protected characteristic at issue in Bostock under Title VII — “sex” — is also present in the fair lending laws.  In addition to that, both ECOA and the FH Act also contain each of what Bostock called “Congress’ key drafting choices” in Title VII, i.e., the two “drafting choices” in Title VII that drove the Court’s holding (Slip Op. 30):

  1. The choice to “hold employers liable whenever sex is a [mere] but-for cause of the plaintiff’s injuries,” as opposed to prohibiting only discrimination based “solely” or “primarily” on a person’s sex. Slip Op. at 30.
    • According to Bostock, if Congress had chosen a causation standard weaker than “but for,” then then discrimination primarily (or “only”) based on an individual’s sexual orientation or gender identity could have been permissible. Under the “but-for” standard, however, such discrimination is prohibited because a necessary, even if subordinate, basis of such a decision is the individual’s sex.  g., Slip Op. 5-6, 30.
    • Bostock found the “but-for” causation standard in Title VII’s prohibition on discrimination “‘because of … sex,’” Slip Op. at 5-6 (quoting 42 U.S.C. § 2000e–2(a)(1)), statutory language found verbatim in the FH Act, § 804(b).  The language in ECOA is slightly distinct — “on the basis of … sex,” § 701(a)(1) — but it is hard to see how that would make a difference, particularly when the Bostock opinion repeatedly uses the very phrase found in ECOA (“on the basis of”) interchangeably with the Title VII language before it (“because of”).  g., Slip Op. at 2, 3.  And like Title VII, neither ECOA nor the FH Act use an intensifier like “primarily because of” or “solely because of” sex.
    • Note: A short table at the end of this article provides the relevant language in each of the three statues.
  1. The choice to “focus on discrimination against individuals and not merely between groups.” Slip Op. at 30.
    • If instead Congress had intended to prohibit merely categorical discrimination — “treat[ing] women generally less favorably than” men, for example — then the law might not be violated by an employer who fires all male and female homosexuals alike, the Court explained. But Bostock found that reading foreclosed by Title VII’s prohibition on discrimination “‘against any individual,’” Slip Op. at 7-8 (quoting  42 U.S.C. § 2000e–2(a)(1)).
    • Again, both ECOA in § 701(a)(1) (prohibiting discrimination “against any applicant,” rather than disfavoring one gender overall), and the FH Act in § 804(b) (prohibiting discrimination “against any person”) seem to mirror the statutory “drafting choice” that the Court found significant.

The upshot is that the Supreme Court’s reasoning under Title VII implies the same result under ECOA and the FH Act, namely that discrimination against an individual based on his or her sexual orientation or gender identity equates to sex-based discrimination, as Justice Alito’s dissent predicts.

B.        Implications

As with employment discrimination, a minority of states have explicitly prohibited discrimination on the basis of sexual orientation and gender identity in recent years.  Nonetheless, an extension of those prohibitions to all states, combined with the far greater enforcement resources available to the federal government, indicate that companies covered by the fair lending laws should begin — or continue — to enhance their policies, employee-training materials, and internal fair lending analyses.

There could be a difference in private-plaintiff claims very soon.  However, given that the Executive Branch argued against the result reached in Bostock, it is hard to predict how much federal enforcement will change for so long as President Trump is in office.  It may be worth noting, however, that the current CFPB’s Web-page on fair lending laws has included a footnote explaining that even before Bostock, caselaw “supports arguments that the prohibition against sex discrimination also affords broad protection from discrimination based on a consumer’s gender identity and sexual orientation.”

Looking ahead, if the federal Administration changes hands based on this fall’s election, the enhanced enforcement capability at the federal level could have a significant impact.  Indeed, in August 2016, President Obama’s CFPB Director, Richard Cordray, concluded in an unpublished, open letter in 2016 that ECOA did in fact outlaw sexual-orientation and gender-identity discrimination, drawing on the same lines of lower court cases under Title VII that signaled the outcome of Bostock.  He went further, opining that the prohibition included but was “not limited to discrimination based on actual or perceived nonconformity with sex-based or gender-based stereotypes as well as discrimination.”

There was not an obvious enforcement impact from that opinion during the one year remaining in Director Cordray’s tenure.  But this issue continues to interest congressional Democrats, as evidenced just last fall when the House held a hearing titled “Financial Services and the LGBTQ+ Community: A Review of Discrimination in Lending and Housing.”  In their view, discrimination against homosexual and transgender persons is widespread.  E.g. id. at 4 (“same-sex mortgage co-applicants” under a recent study “were 73.12% more likely to be denied a loan than different-sex co-applicants with similar characteristics”).  The staff memo for that hearing is also a reminder of just how much federal enforcement of fair lending laws can change depending on which party holds the White House.  According to the staff, for example, there were zero ECOA enforcement actions in 2018, versus 26 actions brought in 2013.

Table:  Comparison of Statutory Language

Title VII ECOA Fair Housing Act

“It shall be … unlawful .  .  .  for an” employer “to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s … sex … .”

42 U.S.C. § 2000e–2(a)(1)


“It shall be unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction … on the basis of … sex … .”

15 U.S.C. § 1691(a)(1).

“[I]t shall be unlawful … To discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection therewith, because of … sex … .”

42 U.S.C. § 3604(b)

Note:  The table above provides only the most relevant language, for comparison purposes.  The fair lending laws contain certain additional prohibitions on credit- and housing-related discrimination.