The FTC recently sent its annual letter to the CFPB reporting on the FTC’s activities related to the Equal Credit Opportunity Act (ECOA) and Regulation B.  The new letter reports on the FTC’s activities in 2023.  The Bureau includes the FTC’s annual letter in its own annual report to Congress on the ECOA.

The FTC has authority to enforce the ECOA and Regulation B with respect to nonbank financial service providers within its jurisdiction.  The letter notes that, consistent with the Dodd-Frank Act, the FTC continues to coordinate certain ECOA enforcement and other activities with the CFPB pursuant to a memorandum of understanding with the Bureau.

With regard to fair lending enforcement, the letter highlights the FTC’s enforcement action against Rhinelander, a group of auto dealerships, and their current and former corporate owners and general manager for allegedly engaging in unlawful discrimination in connection with financing offered to customers and for allegedly engaging in deceptive practices in connection with the sale of add-on products.  The action was brought jointly with the Wisconsin Attorney General.  The complaint alleged that the defendants discriminated against American Indian customers in the cost of financing by charging larger interest rate markups than the markups charged to non-Latino white customers.  It also alleged that the defendants charged American Indian customers for add-on products at a higher rate than non-Latino white customers.

The letter also discusses the mailing of refunds to consumers in connection with settlements in two FTC enforcement actions against two groups of auto dealerships, Passport Automotive Group and Napleton Auto Group, in which the FTC alleged the dealerships violated the ECOA and Regulation B by discriminating against Black consumers (and, in the case of Passport, also Latino consumers) by charging them higher financing costs and fees.  The FTC’s lawsuit against Napleton was filed jointly with the Illinois Attorney General.  In its lawsuit against Passport, the FTC claimed that the alleged discriminatory conduct also constituted unfair discrimination in violation of Section 5 of the FTC Act.

The other enforcement item discussed in the letter is the amicus brief filed by the FTC in support of the CFPB’s appeal to the U.S. Court of Appeals for the Seventh Circuit from the district court’s decision in the CFPB’s enforcement action against Townstone Mortgage.  In the case, the district court ruled that a redlining claim may not be brought under the ECOA because the statute only applies to applicants.  (To read our blog post about the oral argument in the Seventh Circuit, click here.)

With regard to fair lending research and policy development, the letter discusses the statement that the FTC issued jointly with the CFPB, Justice Department, and Equal Employment Opportunity Commission about enforcement efforts “to protect the public from bias in automated systems and artificial intelligence.”  The letter notes that FTC Chair Kahn issued a separate statement in which she noted that the FTC’s authority to address unfair and deceptive practices applies to artificial intelligence, as do the ECOA and other laws.  It also discusses (1) a report to Congress that discussed consumer issues that affect American Indian and Alaska Native populations and the FTC’s enforcement, outreach and education initiatives on these issues, (2) the FTC staff’s continuation of its work as a liaison to the American Bar Association’s Standing Committee on Legal Assistance for Military Personnel which supports initiatives to deliver legal assistance and services to servicemembers, veterans, and their families, and (3) the FTC’s continuation of its (a) service as a member of the Interagency Task Force on Fair Lending along with the CFPB, DOJ, HUD and the federal banking agencies, and (b) participation in the Interagency Fair Lending Methodologies Working Group which consists of staff members from the FTC, CFPB, DOJ, HUD, federal banking agencies, and the Federal Housing Finance Agency.

With regard to fair lending consumer and business education, the letter discusses the FTC’s “efforts to provide education on significant issues to which Regulation B pertains.”  The efforts described include an alert to consumers about shopping for auto financing based on the Rhinelander auto dealer enforcement case and guidance to business on the settlement in the case.

On February 28, 2024, from 1:30 p.m. to 2:30 p.m. ET, we will hold a webinar, “The Federal Trade Commission: Looking Back at 2023 and Looking Ahead to 2024 and Beyond.”  Malini Mithal, Associate Director of the Federal Trade Commission’s Division of Financial Practices, will join us to review highlights of FTC regulatory and enforcement activity in 2023 directed at protecting consumers and small businesses and to discuss what to expect from the FTC in 2024 and beyond.  Ms. Mithal signed the FTC’s letter reporting on its 2023 ECOA-related activities.  For more information about the webinar and to register, click here.