FTC Sidesteps Courts to Drop Fair-Lending Provisions From Auto Dealer Orders

How the FTC Dropped Fair-Lending Provisions From Three Auto Dealer Orders

The Federal Trade Commission has agreed to stop enforcing sections of three federal court orders that prevented auto dealers from discriminating in credit decisions and required fair-lending training. The dealers involved — Passport, Coulter Motor Company and Napleton Auto — had previously been accused by the FTC of charging Black and Latino borrowers higher interest markups and add-on fees on average than white borrowers.

What makes the agreements unusual is that none of the affected courts approved them. The Northern District of Illinois, which handled the Napleton case, said the FTC never asked the court to modify its 2022 order and that the court has made no determination on the new agreement. Arizona Attorney General Kris Mayes, a coplaintiff in the Coulter case, said her office was not notified about the FTC's agreement with former general manager Gregory DePaola and called the move 'outrageous'.

The provisions the FTC will no longer enforce included a ban on discrimination based on race, color, religion, national origin, sex, marital status, age or reliance on public assistance. They also required periodic employee training on fair lending laws, written fee guidelines and the termination of employees who discriminated.

The shift follows last year's Trump administration executive order directing agencies to review past orders and reject disparate-impact liability. The FTC said its earlier accusations were built on statistical analyses designed to show disparate impact, and the agency no longer intends to enforce that theory.

Why the FTC's Court Bypass and Disparate-Impact Reversal Matter

The FTC's Shift Away From Disparate Impact

The agency's stated rationale is that its past accusations against Passport, Coulter and Napleton relied on disparate-impact analysis rather than evidence that managers explicitly told salespeople to treat Black and Latino borrowers differently. Disparate impact involves a neutral policy or practice that causes disproportionate harm to a protected group, even without discriminatory intent. The FTC has now said it will not enforce those claims.

That is a meaningful narrowing of fair-lending enforcement. Disparate-impact cases are hard to win because regulators must identify a specific policy, prove it caused the disparity and show the policy lacks a legitimate purpose. But they have been one of the few tools for challenging pricing patterns that emerge across thousands of transactions — patterns that often show up in automated credit systems without an explicit race-based rule.

Why the Court Bypass Is the Real Precedent

Federal court orders normally change through a court filing. The FTC did not file a motion in the Passport, Coulter or Napleton cases. The Northern District of Illinois said no order was entered concerning the agreement. Arizona's attorney general said her office was not told about the DePaola agreement. By signing side agreements instead, the FTC removed provisions from its own enforcement posture while leaving the court orders technically in place.

That matters because it avoids the scrutiny that came when the CFPB tried to vacate a Townstone Financial settlement in 2025. A judge rejected that request, warning that allowing a new administration to undo final settlements simply because it disliked them would open a Pandora's box. The FTC's approach attempts to reach a similar result without a judge's review — an end run that could weaken the finality of consumer-protection orders.

What Borrowers and State Regulators Lose

The suspended provisions were not trivial. One prohibited discrimination on the basis of race, color, religion, national origin, sex, marital status, age or reliance on public assistance. The other required training, written fee guidelines and sanctions for employees who discriminated. The FTC also agreed not to help anyone investigate compliance with those sections, including state partners.

Arizona has said it will continue to enforce the Coulter order itself. That sets up a possible split: a state attorney general pressing obligations the federal coplaintiff has agreed not to assist. For borrowers, the direct federal protection in these three orders has effectively been withdrawn, even though state law and the Equal Credit Opportunity Act remain available.

Next Steps for Borrowers, States and Auto Dealers

The FTC's decision changes the enforcement picture, but it does not erase the underlying court orders or state authority. What follows depends on each party's next move.

• For car buyers in affected cases: The fair-lending protections in the Passport, Coulter and Napleton orders are no longer being enforced by the FTC. Borrowers who believe they were charged more because of race, national origin or other protected characteristics should document the loan markup and add-ons and consider complaining to the Arizona Attorney General's office or the Illinois Attorney General's office, which retain state enforcement authority.
• For state attorneys general: Arizona has already said it will continue enforcing the Coulter order on its own. That creates an immediate need to review the original settlement terms and determine whether state enforcement can proceed without the FTC's promised non-assistance.
• For auto dealers: The suspended training and written fee-guideline provisions mean federal enforcement around those specific requirements has been withdrawn, but the underlying court orders remain effective until a judge modifies them. Dealers should not assume the FTC's side agreements changed what a court can enforce.
• For lenders using automated underwriting: Because the FTC is rejecting disparate-impact claims, statistical disparities in credit pricing are less likely to trigger federal action under this theory, but state fair-lending laws and private litigation based on the Equal Credit Opportunity Act still apply.