Is Discrimination Unfair?

Abstract

Though multiple federal laws explicitly bar discrimination in consumer transactions, many consumer transactions fall in the gaps between those laws. But recently, the Consumer Financial Protection Bureau (CFPB) and Federal Trade Commission (FTC) have attempted to bridge those gaps on the theory that discrimination is unfair within the meaning of statutes they enforce prohibiting unfair practices (UDAAP statutes). Angered by this view, the US Chamber of Commerce, joined by various banking trade groups, sued the CFPB in a federal court in Texas, challenging the Bureau’s interpretation, and won before a conservative judge. An appeal from the decision is currently stayed.

But the federal district court was wrong. The CFPB and FTC are correct to treat discrimination as unfair. Dictionary definitions from the era when Congress gave the Federal Trade Commission its unfairness power defined unfairness as showing prejudice and not equal. Congress, administrative agencies, the industry itself—including some of the plaintiffs in the Chamber of Commerce’s case against the CFPB—and conservatives all use the word “fair” to mean non- discriminatory. And discrimination satisfies the requirements Congress established for unfair conduct.

The industry argument to the contrary is based in part on a mistaken view of history—that discrimination had not previously been seen as unfair—and the Major Questions Doctrine, which depends in part on an administrative agency’s claimed discovery of a new power. But in fact, beginning in the 1960s, multiple administrative agencies found discrimination unfair under UDAAP statutes. Congress had opportunities to reject those interpretations when it amended the FTC Act to clarify when conduct could be unfair and again when it created the CFPB and gave it UDAP powers, but it did not, suggesting that Congress did not object to them. To be sure, agencies did not arrive at these interpretations until decades after Congress authorized the FTC to pursue unfair practices. Still, it seems particularly unreasonable—even shameful—to limit the meaning of UDAP statutes simply because Jim Crow-era regulators did not use their unfairness authority to attack discrimination. Such an approach would also conflict with the Supreme Court’s holding in Bostock that gender discrimination includes discrimination on the basis of sexual orientation even though the Congress that enacted the statute involved in Bostock may not have so understood that law. Just as the Bostock Court found that the statute’s express terms controlled and that those terms extend to sexual orientation, courts should rule that discrimination is unfair under any plausible understanding of the word.

Keywords: CFPB, FTC, unfair practices, UDAAP, major questions, consumer protection, statutory interpretation, ECOA