FTC Strikes Deals to Ignore Unlawful Credit Discrimination

The Federal Trade Commission recently announced deals with two auto dealers, along with the former general manager of a third, promising not to enforce—or even help enforce—their court-ordered obligations to maintain fair lending programs and not engage in unlawful credit discrimination.

The Northern District of Illinois, which presided over one case, says it was never given the opportunity to evaluate one of the new agreements, and Arizona attorney general Kris Mayes, whose office was a coplaintiff in another of the affected cases, calls the move “outrageous.”

The FTC is doing away with the obligations because the defendants didn’t explicitly instruct its salespeople to treat Black and Latino borrowers differently. Previously, the FTC accused all three of charging people of color more in discretionary markups and add-on fees on average compared to white borrowers. (Disclosure: The author of this article previously worked for the FTC but did not participate in any of the matters mentioned in this article.) In one case, involving a car dealership chain called Passport, the FTC alleged that a financial institution had sent the chain multiple letters notifying it that there were disparities in the markup rates it charged Black borrowers. Attorneys for Passport declined to comment on the agreement.

The FTC and Arizona previously accused Coulter Motor Company and Gregory DePaola, a former general manager at 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.

DePaola, who did not respond to a request for comment, signed one of the new agreements. Coulter and an attorney that represented both Coulter and DePaola in the 2024 settlement did not respond to requests for comment.

“The FTC and the Attorney General’s Office partnered on this case to ensure Arizonans can purchase cars without being misled or charged more because of their ethnicity,” says Mayes. “I find it appalling that the FTC would backtrack on the settlement and treat its state partners this way, not to mention essentially greenlight discrimination against Arizonans.”

The FTC said in a press release that its past accusations against the defendants were “based on statistical analyses designed to show disparate-impact liability” and that the agency was not going to enforce those types of claims anymore. Disparate-impact discrimination is when a seemingly neutral policy or practice causes disproportionate harm to a protected group, even if that wasn’t the original intent. It stands in contrast to disparate-treatment discrimination, which involves policy intentionally meant to discriminate against a group of people.

“It’s actually a really hard theory where you have to identify a specific policy, prove that it caused a disparity, and then the hardest thing of all is you have to prove that that policy doesn’t serve a legitimate purpose,” says Aaron Rieke, the chief legal engineer at a legal startup called Privlex and a former FTC attorney adviser.

Logan Koepke, a senior project director at Upturn, a nonprofit that researches technology’s impact on civil rights, says that disparate-impact analysis is more important than ever, because AI and other automated decisionmaking systems, which can sometimes take unintended actions, are being used more often to make important decisions like loan eligibility.

Last year, the Trump administration directed the FTC and other agencies to review all past orders and take “appropriate action” in an executive order titled “Restoring Equality of Opportunity and Meritocracy.” The administration has said that disparate-impact liability “undermines our national values.”

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. Though the FTC typically has to prioritize some enforcement efforts over others due to resource constraints, by signing and voting out the agreements they essentially delete two sections from each of the orders and potentially make it difficult for future administrations to undo that.