The Market Gap

Discrimination in the marketplace unfairly prevents LGBTQ consumers from obtaining needed goods and services and exacerbates the Wealth Gap because they are denied access to necessities, are provided products or services of inferior quality, or are overcharged.

Example: Financial Services Discrimination

Discrimination in the market for financial services, for example, is especially harmful because it prevents LGBTQ people from leveraging their economic resources to obtain necessities, ease flow-of-payments, invest in durable goods, assets, or capital to improve their well-being.[i] Without access to fair financial service, LGBT households can’t buy homes, workers can’t create savings for retirement, community leaders can’t start new organizations, and cycles of indebtedness and high-cost credit can result for at-risk consumers.[ii]

Discriminatory Treatment

When LGBTQ consumers apply to open accounts or attempt to access their funds, they at times encounter discriminatory financial or customer
service professionals who provide service that is harassing or inferior:

  • Almost 1-in-3 (32%) of LGBTQ student borrowers in 2018 reported discrimination from a financial advisor or professional.[iii]
  • In Anchorage, Alaska nearly 1-in25 LGBTQ people reported being denied a loan or credit line because of sexual orientation, gender identity, or gender presentation, while otherwise qualified[iv]

Trans and GNC customers, in particular, are singled out and denied banking or credit services because of harassment [v] or unfair and outdated policies requiring customers to produce multiple forms of matching identification to open accounts[vi]— and to obtain court-ordered name changes to manage accounts in their preferred name.[vii]

Discriminatory Impact

Discriminatory costs to LGBTQ customers add up. A more considerable disparate impact to the LGBTQ community results from widespread cases of unfair denials of banking and credit service, and the additional interest and fees added to loans. Analysis of mortgage lending data from the Federal Reserve by Iowa State researchers showed same-sex couples seeking home mortgages, as compared to heterosexual couples of similar financial and credit qualifications:

  • Were rejected 73% more often than heterosexual couples.
  • Received .2% higher interest rates, on average.
  • Overpaid $86M each year for home mortgages they received.[viii]

But because there is no data collection or prohibition on LGBTQ discrimination in lending, there is no hard data to make a definitive case for disparate impact in home mortgages. “We’ve never studied it. It has never come up for any of our clients,” reports Michael Taliefero, Managing Director for fair lending consultant ComplianceTech in American Banker in 2013.[ix]


References

[i] See, Thomas A. Durkin, Gregory Elliehausen, Michael E. Staten, Todd J. Zywicki, Consumer Credit and the American Economy, Oxford University Press 23-25 (2014).

[ii] See, Luke Herrine, Credit Reporting’s Vicious Cycles, 40 N.Y.U. Rev. L. & Soc. Change 305, 331 (2016); Sejal Singh & Joe Valenti, In Trump’s Sights: Dismantling Equality in Lending, The Advocate (February 21, 2017) https://www.advocate.com/commentary/2017/2/21/trumps-sights-dismantling-equality-lending.

[iii] Survey: 60% of LGBTQ Student Borrowers Regret Taking Out Student Loans, supra note 18

[iv] Sarah McBride et al., We the People: Why Congress and U.S. States Must Pass Comprehensive LGBT Nondiscrimination Protections, Center for American Progress 1 (December 10, 2014) https://cdn.americanprogress.org/content/uploads/2014/12/24121649/LGBT-WeThePeople-report1.pdf; Melissa S. Green, “Anchorage LGBT Discrimination Survey: Final Report” (Anchorage: Identity, Inc, 2012) http://alaskacommunity.org/wp-content/uploads/2012/03/ akq_final_report.pdf.

[v] Center for American Progress, Paying an Unfair Price: The Financial Penalty for Being Transgender in America, Center for American Progress and Movement Advancement Project 10 (February 2015); https://www.lgbtmap.org/file/paying-an-unfair-price-transgender.pdf.; Jason Volentine, Transgender man claims Chase Bank discriminated against his gender, ABC 15 Arizona (January 5, 2017) https://www.abc15.com/news/region-phoenix-metro/central-phoenix/transgender-man-claims-chase-bank-discriminated-against-his-gender; Boston Man’s Story Shows The Discrimination Transgender People Experience in Public Places in Massachusetts () https://www.freedommassachusetts.org/boston-mans-story-shows-the-discrimination-transgender-people-experience-in-public-places-in-massachusetts/.

[vi] Only one-fifth (21%) of transgender people who had transitioned were able to update all of their identification documents and records with their new gender, and one-third hadn’t updated any of their documents. Center for American Progress, Paying an Unfair Price: The Financial Penalty for Being Transgender in America, Center for American Progress and Movement Advancement Project 11 (February 2015) https://www.lgbtmap.org/file/paying-an-unfair-price-transgender.pdf.

[vii] “Each state has its own policy on issuing new birth certificates and driver’s licenses, and the processes are complicated and costly, frequently requiring proof of medical care for changing the gender marker on official documents. Currently, 41 states require proof of surgery to issue a new birth certificate. Three states will not change gender markers on birth certificates.”Center for American Progress, Paying an Unfair Price: The Financial Penalty for Being Transgender in America, Center for American Progress and Movement Advancement Project 11 (February 2015) https://www.lgbtmap.org/file/paying-an-unfair-price-transgender.pdf.

[viii] Lei Gao and Hua Sun, The Rainbow of Credit: Same-Sex Mortgage Discrimination and Two-Sided Spillover Effect, American Economic Association (April 2017) https://www.aeaweb.org/conference/2018/preliminary/paper/Z3Y34RSk.

[ix] Mark Fogarty, HMDA Data Offers Clues on Discrimination Against Gays, American Banker (June 09 2014) https://www.americanbanker.com/news/hmda-data-offers-clues-on-discrimination-against-gays