FTC Deals with Auto Dealerships to Ignore Unlawful Credit Discrimination
The Federal Trade Commission (FTC) recently announced agreements with two auto dealerships and the former general manager of a third, committing to not enforce their court-ordered obligations to maintain fair lending programs and to ignore unlawful credit discrimination. Critics argue that the FTC is backtracking on its previous accusations.
FTC's Accusations and Settlements
Previously, the FTC accused the defendants of charging people of color more in discretionary markups and add-on fees on average compared to white borrowers. The FTC alleged that a financial institution had sent the car dealership chain Passport multiple letters notifying it of disparities in markup rates charged to Black borrowers. The FTC also accused Coulter Motor Company and Gregory DePaola, the former general manager of the Phoenix-area auto dealer, of charging Latino customers more in interest and for add-on products, in violation of the federal Equal Credit Opportunity Act, among other charges.
Disparate Impact Discrimination
Disparate impact discrimination involves a seemingly neutral policy or practice causing disproportionate harm to a protected group, even if the original intent was not discriminatory. The FTC is now ignoring orders that prohibit discrimination based on race, color, religion, national origin, sex, marital status, age, or reliance on public assistance, and orders requiring the defendants to ensure fair lending practices. Critics argue that this move undermines the FTC's commitment to fair lending and civil rights protections.
Future Implications
The agreements, which were voted on by the commission in early August but went into effect over half a year prior, in November, are highly unusual. Typically, the FTC prioritizes enforcement efforts based on resource constraints. By signing and voting out the agreements, the FTC essentially deletes two sections from each of the orders and potentially makes it difficult for future administrations to undo the changes. The FTC claims that its past accusations were based on statistical analyses designed to show disparate-impact liability, and that the agency is not going to enforce those types of claims anymore.
The agreements are highly unusual, and critics argue that the FTC is backtracking on its previous accusations. Disparate impact analysis is more important than ever, as AI and other automated decision-making systems are being used more often to make important decisions like loan eligibility.
Conclusion
The FTC's decision to ignore its own orders and agreements to ignore unlawful credit discrimination has raised concerns among civil rights advocates. The agreements are highly unusual and could make it difficult for future administrations to undo the changes. Critics argue that the FTC is backtracking on its previous accusations and undermining its commitment to fair lending and civil rights protections. The FTC's decision to ignore its own orders and agreements to ignore unlawful credit discrimination has raised concerns among civil rights advocates and could make it difficult for future administrations to undo the changes.
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