FTC Ends Disparate-Impact Discrimination Claims

The FTC issued a policy statement declaring it will no longer pursue disparate-impact or "unfair discrimination" claims against businesses.

In the policy statement, the Commission explained that disparate-impact theory improperly presumes discrimination based on outcome differences among demographic groups without evidence of discriminatory intent. The agency stated that Congress never granted it the authority to pursue such claims under either FTC Act Section 5, which prohibits unfair or deceptive acts or practices, or the Equal Credit Opportunity Act and that applying disparate-impact analysis would require race-based decision making contrary to constitutional values.

The policy change follows Executive Order 14281 ("Restoring Equality of Opportunity and Meritocracy"), which directs federal agencies to eliminate disparate-impact liability to the maximum degree possible. Going forward, the FTC will continue to bring disparate-treatment claims under the Equal Credit Opportunity Act but will treat Section 5 strictly as a consumer-protection statute.

Under the new policy, the FTC modified compliance obligations in past settlements that had relied on disparate-impact statistical analyses.