The Federal Trade Commission (FTC) has taken a major step toward dismantling two theories of discrimination.
In a new Policy Statement Regarding Disparate-Impact Claims and “Unfair Discrimination” Claims, the FTC announces that it will no longer pursue disparate-impact claims under the FTC Act or the Equal Credit Opportunity Act (ECOA). Just as significantly, although less prominently emphasized in the Policy Statement, the FTC has now repudiated its position that the “unfairness” prong of Section 5 of the FTC Act independently authorizes the Commission to pursue discrimination claims.
The second development is particularly noteworthy because it represents a reversal of a position the FTC itself adopted during the prior administration. In cases such as Passport Automotive Group and Coulter Motor Company, the Commission asserted that discriminatory conduct could constitute an “unfair” practice under Section 5 even apart from a violation of a specific federal antidiscrimination statute.
The FTC’s new position also has an important connection to the Consumer Financial Protection Bureau. In 2022, the CFPB adopted a remarkably similar theory, asserting that discrimination could constitute an “unfair” practice under the Consumer Financial Protection Act’s prohibition against unfair, deceptive, or abusive acts or practices (UDAAP), even where ECOA or another federal fair-lending statute did not apply. A federal district court rejected that theory in 2023. The CFPB appealed, but after the change in administration and leadership at the Bureau, the CFPB joined with the plaintiffs in stipulating to dismissal of its appeal in April 2025, leaving the district court’s judgment vacating the CFPB’s action in place. We have addressed these developments in the past, including here, here, here, and here.
The result is a significant retrenchment in federal agency authority to use general “unfairness” provisions as a substitute for specifically enacted federal antidiscrimination statutes.
The FTC’s Disparate Impact Position
As noted above, the FTC’s new Policy Statement is principally directed at disparate-impact liability.
The Commission states that it “will no longer pursue disparate-impact claims in any context.” It concludes that Section 5 of the FTC Act does not authorize disparate-impact claims and that ECOA likewise does not authorize disparate-impact liability.
The FTC points to the Supreme Court’s decision in Texas Department of Housing & Community Affairs v. Inclusive Communities Project, Inc., 576 U.S. 519 (2015), which held that disparate-impact liability is available under the Fair Housing Act. The Supreme Court reasoned that the FHA contains results-oriented language that reaches practices that “otherwise make unavailable” housing because of a protected characteristic.
The FTC contrasts that language with ECOA, which makes it unlawful for a creditor to “discriminate against” an applicant on specified prohibited bases. In the FTC’s view, that language does not establish disparate-impact liability.
The Policy Statement also relies upon the Supreme Court’s rejection of Chevron deference in Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024), emphasizing that agencies do not receive deference in interpreting statutes merely because Congress has delegated regulatory authority to them.
The FTC therefore concludes that ECOA does not authorize an effects-based theory of discrimination.
The Commission’s ECOA analysis tracks closely the reasoning of subsequently adopted by the CFPB in its April 2026 amendments to Regulation B. The CFPB removed the “effects test” from Regulation B and affirmatively stated that ECOA does not recognize disparate-impact liability. The rule became effective July 21, 2026. The CFPB’s final rule is currently being challenged in federal court, making the ultimate legal status of the ECOA disparate-impact issue uncertain.
Impact of the FTC’s Abandoning Its “Unfair Discrimination” Theory Under Section 5
The FTC’s repudiation of its “unfair discrimination” theory under Section 5 may ultimately prove to be just as important as its position on disparate impact.
Section 5 of the FTC Act declares unlawful “unfair or deceptive acts or practices in or affecting commerce.” During the prior administration, the FTC began interpreting that provision to encompass discrimination as an independently actionable form of unfairness.
The Commission’s theory was potentially broad. It was not limited to discrimination covered by ECOA or another federal civil-rights statute. Instead, the FTC asserted that discriminatory conduct could itself be “unfair” under Section 5.
The Fair Housing Act Remains a Major Exception
The federal retreat from disparate impact does not mean that disparate-impact liability has disappeared from federal law.
The most important exception is the Fair Housing Act.
In Texas Department of Housing & Community Affairs v. Inclusive Communities Project, Inc., 576 U.S. 519 (2015), the Supreme Court held that disparate-impact claims are cognizable under the FHA.
The Court emphasized that the FHA contains results-oriented language and concluded that Congress intended the statute to reach certain discriminatory effects even in the absence of discriminatory intent.
The Court nevertheless imposed significant limitations on such claims, emphasizing the need to avoid second-guessing legitimate business decisions and recognizing safeguards designed to prevent disparate-impact liability from becoming a mechanism for simply forcing housing providers to adopt racial quotas or otherwise abandon legitimate policies.
But the central holding remains: disparate-impact claims are available under the FHA.
Neither the FTC’s Policy Statement nor the CFPB’s Regulation B rule changes that.
HUD Is Also Reconsidering Its FHA Disparate-Impact Regulations
There is another important federal development involving the FHA.
HUD has proposed rescinding its regulations implementing the FHA disparate-impact standard.
HUD’s proposal reflects the administration’s broader effort to reconsider the use of disparate-impact theories across federal civil-rights law. HUD has argued that its detailed regulatory framework is unnecessary and that courts should determine the scope of FHA disparate-impact liability.
But rescinding the regulation would not necessarily eliminate FHA disparate-impact liability.
The Supreme Court—not HUD—recognized disparate-impact liability under the FHA in Inclusive Communities.
Consequently, even if HUD ultimately rescinds its regulation, the Supreme Court’s holding remains binding unless Congress changes the statute or the Supreme Court itself revisits the issue.
This distinction is particularly important for mortgage lenders.
A mortgage lender may be outside the scope of ECOA disparate-impact liability under the CFPB’s new Regulation B rule, but the same conduct may remain subject to disparate-impact challenges under the FHA.
The States May Move in the Opposite Direction
The federal retreat also does not preempt state law.
The FTC’s Policy Statement expressly recognizes that it does not preempt state or local law. Similarly, the CFPB’s Regulation B rule does not prevent states from enforcing their own antidiscrimination laws.
That is likely to become increasingly important.
New York, for example, has made clear that the federal elimination of the ECOA effects test does not eliminate the possibility of disparate-impact liability under New York law. The New York Department of Financial Services has advised regulated entities that discriminatory effects can continue to present risks under state law.
New Jersey has likewise adopted regulations under the New Jersey Law Against Discrimination addressing disparate-impact discrimination, including in housing and financial lending.
California, Illinois, Massachusetts and other states also have civil-rights and fair-lending statutes that may provide independent grounds for challenging discriminatory practices.
The result is that a financial institution may be able to conclude that a practice does not violate ECOA under the federal effects test while still facing substantial exposure under state law.