On August 7, the Federal Trade Commission (FTC) issued a policy statement announcing that it will no longer pursue claims based on disparate impact or “unfair discrimination” theories under any statute it enforces. The FTC’s action is the latest in a series of coordinated federal agency moves away from disparate impact enforcement. As we previously reported here, the Department of Housing and Urban Development (HUD) proposed to repeal its Fair Housing Act disparate impact regulations in January 2026, and the Consumer Financial Protection Bureau (CFPB) finalized its rewrite of Subpart A of Regulation B under the Equal Credit Opportunity Act (ECOA) in April 2026, eliminating the disparate impact “effects test” from ECOA enforcement and reframing ECOA as an intent-only statute (see here). Together with the FTC’s action, these developments signal a sweeping realignment of federal fair lending and consumer protection enforcement away from outcome-based theories and toward intentional discrimination as the operative standard.

Background

Disparate impact theory holds that a facially neutral policy or practice can constitute unlawful discrimination if it produces statistically disproportionate adverse outcomes for a protected group, even without any evidence of discriminatory intent. In recent years, the FTC had pursued disparate impact claims in two contexts: as so-called “unfair discrimination” claims under § 5 of the FTC Act, and as claims under ECOA.

The FTC had asserted unfair discrimination counts in a series of auto dealer enforcement action settlements. Those claims drew sharp dissents from then-Commissioner Ferguson and former Commissioner Holyoak, who argued that § 5 of the FTC Act is a consumer protection statute, not an antidiscrimination statute, and that it lacks the basic features of any antidiscrimination law: it identifies no protected classes, no prohibited conduct, and no framework for justifying practices with disparate effects.

What the Policy Statement Says

The policy statement rests on two grounds.

First, the FTC lacks statutory authority to bring disparate impact claims. Section 5 of the FTC Act prohibits “unfair or deceptive acts or practices,” language that has never been understood to encompass antidiscrimination claims. As the policy statement notes, when Congress intends to prohibit discrimination it says so explicitly, as it did in the Civil Rights Act of 1964, the Americans with Disabilities Act, and ECOA itself. Section 5 contains none of the hallmarks of an antidiscrimination statute: it does not identify protected classes, it does not describe the types of discrimination prohibited, and it provides no framework for business necessity defenses. The only court to consider a materially identical theory, advanced by the CFPB under its own unfairness authority, firmly rejected it.

With respect to ECOA, the policy statement concludes that ECOA creates liability only for intentional discrimination. Under the U.S. Supreme Court’s framework established in the Inclusive Communities case, disparate impact liability is available only where a statute’s text focuses on the consequences of actions rather than the mindset of actors. ECOA’s text does not meet that test.

Second, disparate impact liability is contrary to constitutional values and President Trump’s executive order. The policy statement aligns with President Trump’s Executive Order 14281 on “Restoring Equality of Opportunity and Meritocracy,” which directs federal agencies to deprioritize disparate impact enforcement to the maximum extent possible — the same executive order that prompted HUD’s proposed repeal of its Fair Housing Act disparate impact regulations. The FTC agreed with the executive order’s conclusion that disparate impact liability effectively compels regulated entities to engage in racial balancing to avoid liability, which it argues is a form of race-based decision-making that conflicts with the Equal Protection Clause.

The policy statement also criticizes the statistical methodologies commonly used in disparate impact cases, including Bayesian Improved Surname Geocoding (BISG), which infers consumers’ race from surnames and geographic location and has been criticized for high error rates.

What the FTC Will Still Do

The policy statement makes clear that the FTC is not abandoning antidiscrimination enforcement altogether. The Commission will continue to bring disparate treatment claims under ECOA and will treat § 5 of the FTC Act as the consumer protection statute it was always intended to be. Chairman Ferguson has affirmed the Commission’s commitment to bringing disparate treatment claims where the facts support them.

Prior Enforcement Actions Revisited

In connection with the new policy, the FTC entered into agreements to modify compliance obligations in three prior matters with vehicle dealers that had been based on statistical disparate impact analyses. The Commission vote approving the policy statement and the related settlement modifications was 2-0.