How Financial Inclusion Remains a Challenge for the LGBTQ+ Community

Quick Answer

The LGBTQ+ community has gained significant rights in recent years, but some critical attempts to improve financial inclusion have failed. Here’s what to do if you experience financial discrimination.

Gay couple at home in penthouse, looking over their personal finances together.

From the outside, it may look like the LGBTQ+ community has made huge strides in overcoming legal and financial discrimination. Marriage equality became the law of the land in 2015, and the Biden administration has released a stream of executive orders granting various legal protections for LGBTQ+ people. Access to credit, which was less of an issue to begin with, also widened with a legal reinterpretation of the Equal Credit Opportunity Act.

And while barriers to financial inclusion are still being broken for the LGBTQ+ community, progress remains to be made. According to a 2022 survey by US Bank on the financial landscape of the LGBTQ+ community, 52% of LGBTQ+ respondents said they struggled to get a mortgage, compared with 38% of non-LGBTQ+ people. Other findings concluded that, compared with the general population, LGBTQ+ people experience greater levels of financial stress, poverty and homelessness, and they earn less money.

Read on to learn more about where financial challenges persist for the LGBTQ+ community and how to recognize and address them.

A Slow Path to Equality for the LGBTQ+ Community

Until recently, discrimination against LGBTQ+ people in all facets of life was often overt and legal. It's easy to forget that service members could still get expelled from the military for being gay or lesbian up until 2011.

While discrimination is still a major problem, there has been progress, some through courtroom victories. The 2015 Supreme Court decision in Obergefell v. Hodges made it legal for same-sex couples to marry in any state, solidifying marriage equality nationwide. And in 2020, the Supreme Court decided that employment discrimination against LGBTQ+ people is illegal sex discrimination.

The Equality Act Stalls in Congress

Those decisions were hugely impactful to the livelihoods of the LGBTQ+ community, but they only apply to specific situations. Additionally, some states, counties and cities have passed non-discrimination ordinances that only offer protection within their jurisdictional boundaries. The federal Equality Act, if passed, would enshrine equal rights in all key aspects for LGBTQ+ people, such as lending, employment, housing and access to public services and federally funded programs.

The U.S. House of Representatives passed The Equality Act twice, but it failed both times in the Senate. In the meantime, since many states lack protections, President Biden has issued executive orders that reversed some discriminatory policies related to housing and health care and implemented inclusive policy changes. The downside: Changes through executive orders or presidential policies can be reversed by future presidents.

Concerns for Equality Persist

With no Equality Act in place federally, the LGBTQ+ community and their allies were shaken in June 2022, when the Supreme Court overturned Roe v. Wade. In his concurring opinion, Justice Clarence Thomas suggested the same rationale could one day be used to overturn Obergefell, the same-sex marriage case, and Lawrence v. Texas, which decriminalized consensual, private intimacy between same-sex adults.

In response, Congress passed a bipartisan bill the following month called the Respect for Marriage Act (RFMA), which President Biden signed into law. While it adds protection for already-existing marriages, the bill doesn't guarantee nationwide rights to marriage in any state should Obergefell be struck down.

Instead, it simply guarantees that if Obergefell is struck down, and some states ban same-sex marriage again, same-sex couples can still legally marry in states that allow it. The benefit: The RFMA requires the federal government and all states to recognize the marriage. Advocates argue the RFMA doesn't go far enough and imposes a financial burden potentially forcing couples to travel to another state to marry. To get wider bipartisan buy-in, the RFMA added protections for interracial couples and includes religious exemptions.

In one way, the tides are turning, with public support at an all-time high. A 2022 survey by the Public Religion Research Institute found that the vast majority of Americans—80%—favor laws protecting LGBTQ+ people from discrimination in housing, public accommodations and jobs.

On the other hand, discrimination persists as state legislatures have passed a record number of laws restricting LGBTQ+ rights. Advocacy groups are resisting, but until these bills are sorted out in courtrooms or reversed, the community is at risk of further discrimination and financial harm. Some LGBTQ+ people in areas with punishing new laws are even relocating, but at great cost to their finances and careers.

Recognizing Financial Discrimination

Financial discrimination can show up in various ways for the LGBTQ+ community. As of now, it's illegal to discriminate against LGBTQ+ people in marriage and in most housing and employment situations, and in some health care situations. But loopholes exist, states are rapidly passing new laws and illegal discrimination does still happen.

It's also important to consider the role of intersectionality in discrimination, says Briona Jenkins, a diversity, equity and inclusion consultant in Austin, Texas, who describes herself as a queer Black woman.

"A lot of the time, people think because we've made such progress in the realm of LGBTQIA+ issues and discrimination, that we're all kind of OK," Jenkins explains. "But I think we forget the intersections of people who are both LGBTQ+ and people of color, or people who are LGBTQ+ and have a disability. People who are LGBTQ+ can be more than one thing at any one time, and we have to overcome so much more—and a lot of that deals with finances."

While financial discrimination can appear anywhere, here are some commonly problematic areas to watch out for:

Access to Funding

There's some good news here. In 2021, the Consumer Financial Protection Bureau updated an interpretation of the Equal Credit Opportunity Act making it illegal for lenders to discriminate against a consumer applying for credit (such as loans or credit cards) solely due to sexual orientation or gender identity. While sexual orientation doesn't appear on your credit report or factor into your credit score, that doesn't guarantee you'll be treated fairly by all lenders.

Account Information

When a transgender or nonbinary person adopts a new name and pronouns, it's psychologically important that these are affirmed in all areas of their lives, according to the American Psychiatric Association. However, getting legal documents and identification updated—especially birth certificates—can be a convoluted and expensive legal process that varies by state. Many financial institutions require legal name or gender marker changes before they will update accounts, which for many LGBTQ+ people means having financial accounts or cards with the incorrect name. Fortunately, this appears to be improving. "More credit card companies and banks are creating system allowances that let trans people use their chosen name," says John Auten-Schneider, who runs the personal finance blog Debt Free Guys with his husband, David.

Homebuying Discrimination

While lenders are not allowed to discriminate, the US Bank survey found that 73% of queer respondents felt discriminated against by lenders in the mortgage process. LGBTQ+ homebuyers may experience discrimination from real estate agents or sellers. One way to reduce this risk is to use a real estate agent who's a member of NAGLREP, an association of LGBTQ+ real estate agents, since they're familiar with navigating the process and can recommend affirming partners.

Insurance Denial

While laws and policies vary by type of insurance, the LGBTQ+ community has historically faced discrimination with life insurance. Auten-Schneider says for those with HIV, who often struggle to get approval for life insurance, there's some progress: "John Hancock offers life insurance to people who have HIV, and it looks like this may become more common," he says.

Wage Discrimination

According to the US Bank report, LGBTQ+ adults earn 90 cents on the dollar compared with the average U.S. worker. For those who are trans, and those who are people of color, the gap widens. Those with the biggest wage gap are trans women, who earn 60 cents on the dollar. Overall workplace discrimination is an issue for LGBTQ+ people, since it can impact the ability to get hired, get promoted and access equal pay. The same report found that nearly half (46%) of LGBTQ+ adults have experienced discriminatory treatment at work, and just over a third (34.2%) have left a job because of discrimination.

Laws and policies are always changing, so be sure to check with the American Civil Liberties Union page dedicated to current LGBTQ+ rights to stay in the know.

How to Address Financial Discrimination

It's important to know your rights so you can determine if you're on the receiving end of illegal discrimination. If you believe you've experienced it and are unable to resolve the situation yourself, try these routes for advice and/or recourse:

If you need legal representation, there are many LGBTQ-focused lawyers. If it's too costly, many cities have free or low-cost legal services for the LGBTQ community. The National Center for Lesbian Rights has a list of direct legal aid services.

The Bottom Line

One thing is abundantly clear: LGBTQ+ people are resilient. The US Bank survey found that while the LGBTQ+ community faces some major financial disadvantages and inequities when compared with the general population, LGBTQ+ people also reported higher credit scores and lower debt on average. And those ages 18 and 24 have higher rates of financial independence since those in the community sometimes lack familial support.

It's undeniable that the LGBTQ+ community has made progress in certain areas compared with decades ago, but legal protection and financial inclusion efforts at the federal and state levels still need to be addressed. Until they are, it's important to be aware of what financial discrimination looks like and where you can go for help if you believe you are a victim.