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. One of the sections in the orders that the FTC has agreed to ignore prohibits the defendants from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age, or because the applicant relies on public assistance. The other would have required the defendants to periodically train their employees on fair lending practices and civil rights law, implement written guidelines on how to properly assess fees, and fire employees who engage in discriminatory conduct or violate other parts of the order. The FTC also promised to not help anyone investigate the defendants’ compliance with the all-but-deleted sections, including the states it partnered with to investigate and litigate the cases in the first place. A spokesperson for the Arizona AG’s office says that they plan to continue enforcing the order by themselves. All three of the agreements concern federal court orders, which makes the agency’s approach even more unusual. Typically, when a federal agency wants to change a federal court order, it files a motion in court for a judge to consider the proposed changes. When all the parties—including any coplaintiffs—file together, it shows the judge that everyone is aligned and supportive of the changes. Not doing so can result in closer scrutiny. The Arizona AG spokesperson says the FTC never notified them about the new agreement with DePaola. The agreement was never submitted to the court for review, according to the case docket. A spokesperson for the Northern District of Illinois, where the FTC and the Illinois Attorney General worked together to sue Napleton Auto, another one of the defendants, says the FTC never asked the court to approve the new agreement or to modify the actual court order, which was finalized in 2022. “The court has entered no order concerning the agreement and has made no determination regarding its effect, if any, on the final order,” says the Northern District of Illinois spokesperson, adding that the court “cannot comment on matters outside the public record” and that “questions regarding the FTC’s decision and practices should be directed to the FTC.” The Illinois Attorney General’s Office and attorneys for Napleton Auto did not respond to requests for comment. This is not the first time the Trump administration has tried to undo a court order meant to protect consumers from racial discrimination. In 2025, the Consumer Financial Protection Bureau asked a judge to vacate a court order it had struck with mortgage lender Townstone Financial. The agency had previously accused the lender of redlining Black communities. Had Trump officials been successful, the CFPB would have had to return a $105,000 fine to the lender. In that case, the judge denied the CFPB’s request, pointing out that it would “erode public confidence in the finality of judgements.” The precedent that the request would set, the judge went on, could mean that any new administration could go about undoing settlement agreements, just because new leadership disliked it. That, the judge wrote, was “a Pandora’s box the court refuses to open.”