Bills
| 3.23.22

Should Financial Institutions Report Information on LGBTQ Business Owners’ Access to Capital? (H.R. 1443)

Do you support or oppose this bill?

What is H.R. 1443?

(Updated September 8, 2021)

This bill, the LGBTQ Business Equal Credit Enforcement and Investment Act, would clarify Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) to require financial institutions to collect data on LGBTQ-owned businesses’ access to credit and capital. It would also amend part of the Equal Credit Opportunity Act (ECOA), which currently requires financial institutions to collect data on credit applications submitted by minority- and women-owned businesses, to also add a definition for businesses owned by LGBTQ to the ECOA statute.

Finally, this legislation includes a sense of Congress which would confirm that sexual orientation and gender identity are already covered under ECOA. It would also note that this bill clarifies that information regarding the principal business owners of a business’ sex, sexual orientation, and gender identity should be collected as three separate forms of information. 

For the purposes of this bill, “LGBTQ” refers to “lesbian-, gay-, bisexual-, transgender-, or queer.”

Argument in favor

Access to capital is a challenge for LGBTQ business owners, whose efforts to obtain loans may be complicated by discrimination. Collecting data on LGBTQ borrowers’ access (or lack thereof) to capital is an important tool for ensuring that these drivers of economic inclusion for the LGBTQ community have the financial resources they need to succeed.

Argument opposed

Requiring financial institutions to report on potential borrowers’ sexual orientation would necessitate intrusive data collection efforts that not all LGBTQ individuals may be comfortable with, which could undermine the ability to assess their ability to access capital. Federal financial regulators should limit the collection of personal data to avoid risks posed by a data breach.

Impact

LGBTQ business owners and entrepreneurs; financial institutions; the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank); and the Equal Credit Opportunity Act (ECOA).

Cost of H.R. 1443

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sponsoring Rep. Ritchie Torres (D-NY), who is himself an openly gay man, introduced this legislation to require financial institutions to collect data on LGBTQ-owned businesses’ access to credit and capital. After this bill passed the House Financial Services Committee on a party-line vote, Rep. Torres said:

“In the United States, there are 1.4 million LGBTQ businesses contributing more than 1.7 trillion dollars to the American economy.  We have a vested interest in sustaining and strengthening these businesses with equal access to credit, which is the beating heart of the American economy… [This legislation] builds on a foundation laid by several statutes and regulations.  The Equal Credit Opportunity Act (ECOA) prohibits credit discrimination, including but not limited to sex discrimination. A new interpretive rule from the Consumer Financial Protection Bureau (CFPB) clarifies that the ECOA's prohibition against sex discrimination applies to sexual orientation and gender identity. Section 1071 of Dodd-Frank, which exists to enable and enhance the enforcement of the ECOA, requires financial institutions to report information about the race, ethnicity, and sex of credit applicants who serve as principal owners of small businesses. My legislation would expand the 1071 reporting requirements to include not only sex but also sexual orientation and gender identity. In doing so, it would enable anti-discrimination enforcement where none might exists… HR 1443 would make credit more accessible, credit laws more enforceable, and creditors more accountable.  It would represent a triumph of transparency in the service of economic opportunity for all, regardless of who you are and whom you love.”

After this bill failed to pass the House under the “suspension of the rules” process which requires a two-thirds majority due to Republican opposition, Rep. Torres tweeted:

“The Republicans in the House voted down my legislation, HR 1443, which would protect LGBTQ-owned businesses from discrimination. A slap in the face to the LGBTQ community right in the heart of Pride Month.”

The Center for LGBTQ Economic Advancement & Research (CLEAR) supports this legislation. In a May 7, 2021 letter, CLEAR wrote:

“Effective fair lending protections for LGBTQ credit applicants are direly needed. Despite the lack of SOGI data in federal fair lending data, nonprofits and academics have shown how LGBTQ people experience discrimination in credit… Improving LGBTQ businesses’ fair access to lending capital, as H.R. 1443 will do, will improve financial health and success for LGBTQ businesses, their local communities, and the entire economy.”

This legislation failed to pass the House by a 248-177 vote (it needed a 2/3 vote to pass under suspension of the rules), with all “no” votes coming from Republicans, and is scheduled to be reconsidered under a rule so that it can pass with a simple majority. It has 41 Democratic House cosponsors. This legislation is endorsed by the Center for American Progress (CAP), Center for LGBTQ Economic Advancement & Research, and other progressive and LGBTQ rights organizations.

Former Rep. Harley Rouda (D-CA) introduced similar legislation in the previous Congressional session in 2019, which wasn’t considered on the House floor in the 116th Congress.


Of Note: There are an estimated 1.4 million LGBTQ-owned businesses in the U.S. These businesses contribute over $1.7 trillion dollars to the U.S. economy. However, according to StartOut, LGBTQ entrepreneurs suffer from a systemic lack of access to capital and entrepreneurship support.

In two-thirds of the 77 cities with 50 or more high-growth entrepreneurs, there are no LGBTQ founders of those fast-growing companies. By contrast, San Francisco, which is home to the largest technology ecosystem in the U.S. and a vibrant gay community, accounts for nearly 80% of the total U.S. funding for LGBTQ entrepreneurs over the last 20 years. Those entrepreneurs have created over 15,000 jobs.


Media:

Summary by Lorelei Yang

(Photo Credit: iStockphoto.com / Mongkolchon Akesin)