Department News COMPLIANCE


A Prohibited Basis In Regulation B Clarified By Bryan Bradley, CRCM, Vice President of Compliance Services


  Te rule was published in the Federal Register on March 16 and became effective the same date.


Before we launch into the CFPB clarification, it may be helpful to recap the nine prohibited bases under ECOA and Regulation B. At its core, Regulation B states that a creditor shall not discriminate against any applicant on a prohibited basis regarding any aspect of a credit transaction. Simply put, this means “cradle” to “grave” of the entire life cycle of a loan.


Te nine prohibited bases under Regulation B follow. 1. race 2. color 3.


religion


4. national origin 5. sex 6. marital status 7. age (assuming the applicant has the capacity to enter into a binding contract)


8. the fact that all or part of the applicant’s income derives from any public assistance program


9. the fact that the applicant has in good faith exercised any right under the Consumer Credit Protection Act or any state law upon which an exemption has been granted by the bureau


Te CFPB’s recently issued rule specifically addresses the issue of sexual orientation and gender identity discrimination, including discrimination based on actual or perceived nonconformity with sex-based or gender-based stereotypes and discrimination based on an applicant’s associations.


Te rule is partly based on the Supreme Court’s June 2020 ruling in Bostock v. Clayton County, Georgia. Te court ruled that the prohibition against sex discrimination in Title VII of the Civil Rights Act of 1964 encompasses sexual orientation discrimination and gender identity discrimination. Te court relied on three key findings to reach its decision. 1. Sexual orientation discrimination and gender identity discrimination necessarily involve consideration of sex.


2. Title VII’s language requires sex to be a “but for” cause of the injury but need not be the only cause.


3. Title VII’s language covers discrimination against individuals and not merely against groups.


Before the Bostock opinion, 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 (e.g., housing-related) credit transactions.


Te CFPB stated in its rule that it interprets the ECOA and Regulation B prohibitions against discrimination on the basis of “sex” to include discrimination on sexual orientation and/ or gender identity. Historically, the ECOA and Title VII are generally interpreted consistently.


As a result of this rule, banks are encouraged to make appropriate modifications to affected bank policies, procedures and staff fair lending training.


This article is for information purposes and does not contain or convey legal advice. The information should not be used or relied upon in regard to any particular situation without consultation with your bank attorney. MBA Compliance Services and its Compliance Force program  information, call 573-636-8151.


10 mobankers.com


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