An article recently published by the Student Borrower Protection Center titled “Discrimination is ‘Unfair’,” argues that the CFPB, FTC, state attorneys general and regulators, and in some cases private individuals, should consider challenging discrimination as an “unfair” practice covered by federal and state laws prohibiting unfair, deceptive, or abusive acts and practices.  (The authors are two attorneys who are members of a law firm that frequently represents plaintiffs in discrimination cases.)

The article calls unfairness “an obvious fit for addressing common types of discriminatory conduct” because in the authors’ view, discriminatory conduct “fits neatly within” the Dodd-Frank Act and FTC definitions of an unfair act or practice.  Under those laws, an act or practice is unfair if (1) it is likely to cause substantial injury to consumers; (2) the injury is not reasonably avoidable; and (3) the injury is not outweighed by countervailing benefits to consumers or competition.  The article asserts that the use of an “unfairness-discrimination” theory would fill important gaps in the existing patchwork of antidiscrimination laws, most significantly practices not covered by the ECOA.  The article further argues that both disparate treatment and disparate impact would be actionable under this view of UDAAP statutes.

The article asserts that agencies and states could use the unfairness discrimination theory immediately through supervision or enforcement and private parties could do so immediately through private actions where allowed by state law.  According to the article, “[p]articularly in cases with strong evidence of intentional discrimination against traditionally protected classes, defenses that entities did not have sufficient notice of this application of unfairness statutes are unlikely to be persuasive.”

The article also calls upon “federal agencies with administrative authority over the unfairness laws [to] also pursue complementary regulatory actions,” such as first issuing “guidance and interpretive rules that do not require notice-and-comment rulemaking” and next engaging in formal rulemaking to adopt rules that apply the unfairness-discrimination theory.

According to the article, Rohit Chopra, President Biden’s nominee for CFPB Director, “has advocated this theory.”  The article quotes Mr. Chopra as having said that “discriminatory practices often are three for three, causing grievous harm that cannot be avoided.”  The “three for three” to which Mr. Chopra referred in the quoted language are the three elements of the definition of an unfair practice in the Dodd-Frank Act and the FTC Act.

Nevertheless, in our view, the idea that UDAP/UDAAP statutes could be used to bring discrimination claims in areas where Congress has not chosen to enact a specific statute seems like more of a wish than a real, practical possibility.  Congress has enacted anti-discrimination laws in carefully-chosen areas – employment, housing, credit, public accommodations – and has limited the reach of each of the statutes in those areas.  Interpreting the FTC Act (which has been around more than 100 years) to prohibit all discrimination would imply that Congress decided to “fill the gaps” in anti-discrimination legislation before the gaps even existed, which makes little sense.  And the gaps that this argument is designed to fill were created by Congress in the manner in which it enacted legislation.  We believe, and suspect a court would find, that it is Congress’ prerogative to address these “gaps,” and that it would be inappropriate for a court or administrative agency to do so.

The article’s assertion that disparate impact claims could be brought under UDAP/UDAAP statutes is even more lacking in support.  The U.S. Supreme Court held in Inclusive Communities and Smith v. City of Jackson that Congress must use language in a statute to show an intent to apply an “effects test.”  There is certainly no such language in the FTC Act or in the definition of “unfair” in Dodd-Frank.

It’s natural for consumer advocates to argue for expansive interpretations of consumer protection laws, but in this instance, we believe that interpreting UDAP/UDAAP statutes in the manner suggested by this article is a step well too far, that would be highly likely to be rejected by the federal courts.