Reducing poverty in the LGBTQ+ community by fostering inclusion through business access to credit

Today Out Leadership’s Founder and CEO, Todd Sears, sent a letter to Representative Maxine Waters, the Chairwoman of the Financial Services Committee, in support of Representative Torres’ LGBTQ Business Equal Credit Enforcement and Investment Act.

Read the full letter here.

The Financial Services Committee is expected to markup the bill next week. It constitutes one of the Congressional Equality Caucus’s top priorities for the 117th Congress, along with bill H.R. 1277 on corporate Board diversity that Out Leadership has been championing. H.R. 1443 now has the full official support of Out Leadership, the largest and oldest coalition of businesses championing LGBTQ+ equality.

Indeed, there is growing evidence that in the United States and around the world LGBTQ+ people face significant barriers when they attempt to attain their full economic potential including equal access to credit for business owners from the LGBTQ+ community.

As our research partner the Williams Institute showed in several studies, this negatively impacts LGBTQ+ individuals and their families as well as the US economy as a whole. A sort of self-inflicted wound. Professor Lee Badgett highlighted in a 2014 World Bank study that homophobia and transphobia cost 1% or more of a country’s GDP. These losses manifest in production, since LGBTQ+ are unable to start and operate their own businesses or find adequate employment. But they also manifest also in consumption, since the earning power of LGBTQ+ people is lower than their heterosexual and cisgender peers. An “LGBTQ+ wage gap”, which if addressed, could substantially reduce the disproportionately high poverty rates in the LGBTQ+ community. In an October 2019 study published by the Williams Institute showed that “LGBT people collectively have a poverty rate of 21.6%, which is much higher than the rate for cisgender straight people of 15.7%”. Anecdotal evidence shows that this gap worsened during the pandemic because of the specific vulnerability of LGBTQ+ livelihoods.

For this reason, getting lesbian, gay, bisexual and transgender-owned businesses recognized in federal and local governments’ efforts to promote equal access to credit is one of the priorities of Out Leadership.

The LGBTQ Business Equal Credit Enforcement and Investment Act would do two key things to help LGBTQ+-owned businesses: collect data on and define “LGBTQ-owned business”.

First, it would ensure, financial institutions collect information on LGBTQ+-owned businesses access to credit. Section 1071 of the Dodd-Frank Act amended the Equal Credit Opportunity Act (ECOA) to require financial institutions to compile and maintain certain data on applications for credit for women-owned, minority-owned, and small businesses. Congressman Torres’s bill would simply add “LGBTQ-owned” businesses to this requirement.

At Out Leadership, we believe being counted in data that is being gathered is valuable because it influences decisions. LGBTQ+ people tend to be the least studied population globally. Collecting this data is crucial for identifying business development needs and opportunities for LGBTQ-owned businesses.

Secondly, this legislation would also define the term “LGBTQ-owned business” in federal law. We believe it would also ensure LGBTQ+ people are more systematically included in federal definitions of diversity.

Out Leadership, along with our other community partners such as the National LGBT Chamber of Commerce (NGLCC), believes that Rep. Torres’ initiative will contribute to create a level-playing field for LGBTQ+-owned businesses paving the way for greater access to economic opportunities for the community.