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

The statement makes clear that Section 5 of the FTC Act, the UDAP provisions, were never meant to be an anti-discrimination statute.

And that the prior commission was essentially trying to make new law.

I mean, like you had said, Chris, we'd seen this kind of the CFPB.

What are your thoughts on that characterization just generally that anti-discrimination is not a UDAP?

I think it is correct as a matter of statutory interpretation.

And in fact, as I alluded to earlier, the CFPB also went down this road at about the same time during the Biden administration and did it via an update to its UDAP examination manual and used that as the vehicle to announce that, oh, we've suddenly discovered that the word unfair in the Dodd-Frank UDAP statute encompasses discrimination.

And so now we're not tethered by the specifics of the Equal Credit Opportunity Act, which only apply to credit and creditors and certain protected classes and annoying things like that.

Now we can apply anti-discrimination principles in other non-credit products like deposit accounts and credit reporting.

And we don't have to tie ourselves to the protected classes that Congress decided to put in the Equal Credit Opportunity Act.

You may recall that during the Biden administration, a coalition of trade groups, banking trade groups, filed a lawsuit in the, I believe, northern district of Texas, challenging that exam manual as being outside the CFPB's authority because unfair doesn't encompass discrimination.

And the district court agreed with them.

And enjoined the CFPB from applying that policy to anybody who was a member of the associations that were the plaintiffs in that case.

And the district court's reasoning was essentially, look, Congress has enacted very specific anti-discrimination statutes like the Equal Credit Opportunity Act or the Fair Housing Act or Title VII or Americans with Disabilities Act, etc., And when it has done so, it has done so very specifically and has used very careful language to describe sort of what's okay and what's not okay under each of those discrimination statutes.

And you can't, against the backdrop of that very specific anti-discrimination legislation, say that the word unfair empowers an administrative agency to just make its own law and create a new anti-discrimination statute with no guidance whatsoever from Congress.

That I always felt like was the most persuasive argument, and the district judge in that case agreed with it.

That case then went to an appeal to the Fifth Circuit, and the appeal was pending at the time of the administration change to the current Trump administration.

And so, as you would expect, the Trump administration, after it got its legs under it, agreed with the outcome in the district court, dismissed the appeal, and let the district court opinions stand together with its injunction.

So my feeling is the FTC's ability to argue that unfair in the FTC Act means no discrimination is just as weak, if not weaker, than the Dodd-Frank argument was, particularly since the FTC statute is over 100 years old.

Before we had any anti-discrimination legislation in this country that came about during the civil rights era, you know, in the 1960s, for the earliest of those statutes.

So I think that Chair Ferguson's statement in this regard is correct.

And I think if it gets litigated and the Supreme Court got a hold of it, they would find that unfair doesn't encompass discrimination either.

And in fact, the Trump administration is actively looking for a way to get the Supreme Court to decide that disparate impact generally is unconstitutional.

because there's plenty of people in the administration who feel that way, and we'll see if the Supreme Court takes that case or decides it, but that is a very great interest of the regulatory agencies in the Trump administration.

The statement makes clear that Section 5 of the FTC Act, the UDAP provisions, were never meant to be an anti-discrimination statute.

And that the prior commission was essentially trying to make new law.

I mean, like you had said, Chris, we'd seen this kind of the CFPB.

What are your thoughts on that characterization just generally that anti-discrimination is not a UDAP?

I think it is correct as a matter of statutory interpretation.

And in fact, as I alluded to earlier, the CFPB also went down this road at about the same time during the Biden administration and did it via an update to its UDAP examination manual and used that as the vehicle to announce that, oh, we've suddenly discovered that the word unfair in the Dodd-Frank UDAP statute encompasses discrimination.

And so now we're not tethered by the specifics of the Equal Credit Opportunity Act, which only apply to credit and creditors and certain protected classes and annoying things like that.

Now we can apply anti-discrimination principles in other non-credit products like deposit accounts and credit reporting.

And we don't have to tie ourselves to the protected classes that Congress decided to put in the Equal Credit Opportunity Act.

You may recall that during the Biden administration, a coalition of trade groups, banking trade groups, filed a lawsuit in the, I believe, northern district of Texas, challenging that exam manual as being outside the CFPB's authority because unfair doesn't encompass discrimination.

And the district court agreed with them.

And enjoined the CFPB from applying that policy to anybody who was a member of the associations that were the plaintiffs in that case.

And the district court's reasoning was essentially, look, Congress has enacted very specific anti-discrimination statutes like the Equal Credit Opportunity Act or the Fair Housing Act or Title VII or Americans with Disabilities Act, etc., And when it has done so, it has done so very specifically and has used very careful language to describe sort of what's okay and what's not okay under each of those discrimination statutes.

And you can't, against the backdrop of that very specific anti-discrimination legislation, say that the word unfair empowers an administrative agency to just make its own law and create a new anti-discrimination statute with no guidance whatsoever from Congress.

That I always felt like was the most persuasive argument, and the district judge in that case agreed with it.

That case then went to an appeal to the Fifth Circuit, and the appeal was pending at the time of the administration change to the current Trump administration.

And so, as you would expect, the Trump administration, after it got its legs under it, agreed with the outcome in the district court, dismissed the appeal, and let the district court opinions stand together with its injunction.

So my feeling is the FTC's ability to argue that unfair in the FTC Act means no discrimination is just as weak, if not weaker, than the Dodd-Frank argument was, particularly since the FTC statute is over 100 years old.

Before we had any anti-discrimination legislation in this country that came about during the civil rights era, you know, in the 1960s, for the earliest of those statutes.

So I think that Chair Ferguson's statement in this regard is correct.

And I think if it gets litigated and the Supreme Court got a hold of it, they would find that unfair doesn't encompass discrimination either.

And in fact, the Trump administration is actively looking for a way to get the Supreme Court to decide that disparate impact generally is unconstitutional.

because there's plenty of people in the administration who feel that way, and we'll see if the Supreme Court takes that case or decides it, but that is a very great interest of the regulatory agencies in the Trump administration.