- The Washington Times - Saturday, December 18, 1999

“Fairness” is one of those terms that, corrupted by demagogues, has come to mean exactly the opposite of what it once did. The recent fine levied by the Federal Trade Commission (FTC) against Ford Motor Co. is a case in point. The automaker’s credit arm Ford Motor Credit was accused of “unfairly discriminating” against unmarried couples who applied for automobile loans. Ford has now agreed to pay $650,000 to settle claims made under the Equal Credit Opportunity Act; the proceeds will be distributed to loan applicants who were “adversely affected” by Ford’s credit criteria.

But is this “fair”? Ford quite reasonably based its lending decisions, at least in part, on the stability of loan applicants and their ability to repay the loan. Was it unfair for Ford to assume that married couples are more likely to remain together and hence share the burden of paying off a car loan than an unmarried couple who just happen to be living together (and maybe not even that)? When Mr. and Mrs. Joe Smith apply for a loan, they are a legal entity, jointly responsible for their debts as a family unit. When Joe Smith and his girlfriend decide to buy a car and three months later one of them splits who will pay off the note?

Ford based its more favorable credit offers to married couples based on the joint earning power, debt ratio, etc. of two earners. In the case of the unmarried couple, the car is not held in common, as marital property, but rather titled to just one of the two individuals. If the relationship ends, the person holding the title is still responsible for making the payments even if the payments themselves were based on two incomes, as the FTC demands be done. Guess who gets left holding the bag when Joe Smith, single guy, can’t make the payment now that his girlfriend has split? Bingo! Ford Motor Credit and by proxy, all other loan applicants, who get to pay higher interest rates to cover the cost of recovering defaulted loans.

To avoid this, Ford did not count the combined income of unmarried couples and instead offered credit based solely on the income and paying ability of evil deed the person making the application. For this, the FTC let loose its hounds. Ford knuckled under, realizing the futility of arguing against “fairness.” “We regret any inconvenience unmarried couples might have suffered,” said Ford spokesman Walter Jennings in a statement released last week.

The FTC never alleged anything approaching a malign motive on the part of Ford. White unmarried couples got the same deal as unmarried minority couples while married minority couples got better terms than both. The automaker was simply exercising prudent judgment, using criteria that an earlier generation would never have questioned. People used to accept that such things as an “A” credit rating had to be earned (by working hard, building a record of stability and responsibility, etc.) rather than simply be conferred by dint of government largesse.

Whatever one chooses to call it, the FTC’s decision had nothing to do with genuine fairness.

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