The FTC Caught Up: What You Need to Know About Its Latest Disparate Impact Statement

Chris Willis (0:09)

Welcome to this special crossover edition of Moving the Metal and the Consumer Finance Podcast. I'm Chris Willis, the co-leader of Troutman Pepper Locke's Consumer Financial Services Regulatory Practice. And today, we're going to be talking about the FTC's recent statements about disparate impact and unfair discrimination, and the impact that they have on the auto finance market and the consumer financial services market in general. But before we jump into that topic, let me remind you to visit and subscribe to our blogs, troutmanfinancialservices.com and consumerfinancialserviceslawmonitor.com.

And don't forget about all of our other podcasts, the FCRA Focus, Payments Pros and the Crypto Exchange, which are available on all popular podcast platforms. And speaking of those platforms, if you like these podcasts, let us know. Leave us a review on your platform of choice and let us know how we're doing. Now, as I said, today we're going to be talking about a statement that the Federal Trade Commission recently made about disparate impact and unfair discrimination under Section 5 of the FTC Act. And there's no one better to discuss that with than the two co-hosts of the Moving the Metal podcast, Brooke Conkle and Chris Capurso. So Brooke, Chris, it's great to be with you again.

Chris Capurso (1:15)

As always.

Brooke Conkle (1:16)

Thanks, Chris.

Chris Willis (1:17)

So Brooke, let me start with you. This statement from the FTC is about disparate impact. So just give the audience a little refresher on what that is and how did we get here with the FTC?

Brooke Conkle (1:27)

Absolutely. In plain terms, traditional discrimination claims are different from disparate impact. Traditional discrimination requires proof that someone intentionally treated a customer differently because of their race or another protected characteristic. Disparate impact, on the other hand, is a policy or practice that can be illegal because it produces different outcomes for different groups even without intent. So regardless of whether a business intended to discriminate, if a policy results in a different outcome for a protected class, then that can be disparate impact. Now, Chris, just as you mentioned, so what has the FTC done here? The FTC issued a formal policy statement saying it will no longer pursue disparate impact claims in any context full stop.

And there are really two core reasons cited by Chairperson Ferguson. First is statutory authority. The FTC concluded that it actually never had the legal authority to bring these claims to begin with.

Particularly Section 5, according to this version of the FTC, is a consumer protection statute. It's not an anti-discrimination statute. Then second, the executive order from President Trump, Restoring Equality of Opportunity and Meritocracy, which directed federal agencies to de-prioritize disparate impact enforcement. And Chris, this is not in a vacuum. What's the history here and how did we get here?

Chris Willis (2:57)

Well, historically, the FTC, which does have enforcement authority under the Equal Credit Opportunity Act, has brought some disparate impact cases. And most notably during the Biden administration, brought a number of dealer pricing cases dealing with the pricing of interest rates on retail installment contracts that were predicated on a disparate impact theory and pursued those cases. And that led to settlements with some large automotive dealer groups. And likewise, during the Biden administration, the FTC took the position very vocally and even used it in a couple of enforcement cases that again were ended by consent orders, that discrimination was unfair under the language of the FTC Act, which prohibits unfair and deceptive acts and practices. And so that has sort of been in the background. Of course, the CFPB made its own try at unfair discrimination too, which I'm sure we're going to talk about in just a minute. And so I think what you have to see is this reversal by the FTC announced by Chairperson Ferguson is basically moving away from the statements that the FTC made in enforcement cases and otherwise during the Biden administration about disparate impact and unfair discrimination. The only question in my mind though is like, why did it take so long? Because the executive order came out in April of 2025, I think, and the federal banking regulators and the CFPB followed very rapidly with statements that they weren't going to do disparate impact anymore. The federal banking regulators removed it from their exam manuals, the CFPB published its guidance document saying we're not going to do this anymore. And only more than a year later did the FTC come around to joining the party, which I think we all assumed was going to happen, but it is surprising to me that it took so long.

Brooke Conkle (4:40)

Chris, we'll say Chris C. This did not come out of left field for Chairperson Ferguson either. He's got a history here, doesn't he?