Gender Identity, Fair Lending and the CFPB – What Now?

A financial institution recently questioned whether it should remove references to gender identity from its fair lending policy now that the CFPB has rescinded its 2021 interpretive guidance. It is a fair question, and not a simple one. The issue touches on law, policy, politics, and institutional values. While most of my articles focus on practical compliance questions, such as what a regulation requires or how to disclose information properly, this piece takes a short detour. Consider it a thought experiment for financial institutions trying to navigate shifting regulatory signals and social expectations while managing compliance risk.

Background: What changed?

In 2021, the CFPB issued an Interpretive Rule under the Equal Credit Opportunity Act (ECOA) and Regulation B stating that discrimination based on sexual orientation or gender identity constitutes discrimination “on the basis of sex.” The Bureau based this interpretation on the Supreme Court’s decision in Bostock v. Clayton County, Georgia (2020), which held that Title VII’s prohibition against sex discrimination includes discrimination against employees for being gay or transgender.

That interpretive rule, published at 86 FR 14363 (March 16, 2021), was part of a broader Biden administration initiative under Executive Order 13988. The order directed federal agencies to interpret sex-based discrimination protections to include sexual orientation and gender identity wherever applicable.

In May 2025, the CFPB rescinded that interpretation through 90 FR 20084 (May 12, 2025), following a change in political and regulatory leadership. The Bureau did not issue a replacement interpretation, which effectively returned ECOA enforcement to its pre-2021 posture.

This leaves financial institutions without clear federal guidance on whether gender identity discrimination is considered a form of sex discrimination under ECOA.

Current state of play: What does the law say now?

ECOA, as implemented by Regulation B, prohibits credit discrimination “on the basis of sex,” among other protected characteristics, but does not explicitly mention gender identity or sexual orientation. With the CFPB’s 2025 withdrawal of the interpretive rule, the agency is no longer treating gender identity as a protected class for ECOA enforcement purposes.

The Fair Housing Act (FHA), which applies to mortgage lending and other housing-related activities, also prohibits sex-based discrimination. While it does not explicitly reference gender identity or sexual orientation, courts may interpret its protections using reasoning similar to that in Bostock.

Bostock still matters

Bostock held that the term “sex” in Title VII includes discrimination based on sexual orientation and gender identity. Although the decision focused on employment discrimination, some courts and agencies (including the CFPB in 2021) have argued that the same reasoning applies to other federal anti-discrimination statutes, including ECOA and the FHA.

While the CFPB is no longer enforcing that view, Bostock remains binding Supreme Court precedent. If a consumer brings a lawsuit alleging gender identity discrimination in credit or housing, a court may still apply Bostock and find a violation of federal law, even without CFPB enforcement.

State law: a patchwork of protections

Many states have their own anti-discrimination statutes that apply to credit and housing, and a growing number explicitly include gender identity and sexual orientation. In these jurisdictions, maintaining policy language prohibiting gender identity discrimination may be a legal requirement, not just a best practice. Even in states without explicit protections, state regulators may still interpret sex discrimination broadly and take enforcement action.

ESG and reputational risk

Environmental, Social, and Governance (ESG) factors are increasingly part of how institutions evaluate risk and performance. The “S” in ESG covers social considerations, which include diversity, equity, inclusion, and the fair treatment of customers and employees.

Fair lending fits squarely within this category. Removing gender identity protections from a policy could be perceived as a reversal of commitment to fairness and inclusion. Potential risks include:

• Loss of public trust
• Negative media attention
• Employee dissatisfaction
• Pressure from advocacy organizations
• Perceived inconsistency with public ESG or DEI commitments

On the other hand, some institutions face external pressure to limit ESG-related language and may see retaining such provisions as a political or reputational risk. The right approach depends on the institution’s market, customer base, and overall strategic direction.

Should you change your policy?

Whether to keep or remove references to gender identity is a policy decision based on legal analysis, operational considerations, and strategic priorities. Removing the language may reduce perceived political exposure in certain markets, but it could increase legal and reputational risk elsewhere. Retaining the language may align with state requirements, provide legal defensibility under Bostock, and support ESG or DEI commitments.

Institutions should make this decision intentionally, with input from legal counsel, compliance, executive leadership, and, where appropriate, their governing board.

Final thought

Fair lending compliance has always required balancing legal requirements, operational consistency, and community expectations. This issue is no different. The CFPB’s withdrawal of its 2021 interpretive rule does not eliminate all potential risk related to gender identity discrimination. Institutions should weigh federal precedent, state law, reputational factors, and corporate values before deciding whether to revise their policies. A deliberate, well-documented approach will help ensure that the decision, whatever it may be, supports the institution’s compliance obligations and long-term strategy.