WASHINGTON, D.C. — The Federal Trade Commission will no longer pursue discrimination claims based on disparate-impact theories, narrowing how the agency will use its consumer-protection authority while preserving enforcement against intentional discrimination in areas such as credit.
The commission adopted the policy in a 2-0 vote, concluding that it lacks statutory authority to impose liability based on statistical disparities among demographic groups without evidence of intentional discrimination.
The change follows an executive order issued by President Donald Trump last year directing federal agencies to eliminate the use of disparate-impact liability “to the maximum degree possible.” The administration has argued that such liability can pressure businesses and other institutions to consider race when attempting to avoid legal exposure.
FTC Chairman Andrew N. Ferguson similarly argued that disparate-impact claims can impose discrimination liability “without any evidence that anyone intended to discriminate.”
“The Commission never had authority to impose disparate-impact liability,” Ferguson said. “Today, we announce that the Commission will never do so again.”
Disparate-impact analysis generally examines whether a facially neutral policy or practice disproportionately affects members of a protected group, rather than requiring proof that an entity intentionally treated people differently.
The FTC’s policy statement argues that applying that approach under the agency’s statutes would require race-based analysis and potentially give the commission broad authority over policies producing different outcomes among demographic groups.
The agency will continue pursuing disparate-treatment claims where authorized. That includes enforcement under the Equal Credit Opportunity Act involving allegations of intentional differential treatment, according to the commission.
At the same time, the FTC said it will treat Section 5 of the Federal Trade Commission Act as a consumer-protection statute rather than use it as a basis for disparate-impact liability.
The policy is also affecting previous FTC enforcement actions. Following a review of decisions involving statistical analyses used to establish disparate-impact liability, the commission entered agreements modifying certain compliance obligations involving Napleton Inc., Passport Auto Group and an individual formerly associated with Coulter Motor Company LLC.
The commission approved both the policy statement and the related agreements by the same 2-0 vote.
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