CFPB and Townstone Reach Settlement Over Alleged Discriminatory Practices

Last week the CFPB filed a proposed order resolving an ongoing case against a non-bank lender, Townstone Financial, Inc., regarding an alleged ECOA violation based on discouragement of prospective applicants.

The suit originated in 2020 when the CFPB filed suit against Townstone, alleging its advertising and marketing “discouraged potential applicants because of their race or the racial composition of where they lived or sought to live.”  The case was the subject of a Seventh Circuit decision after the trial court dismissed Townstone on the basis that ECOA does not apply to consumers who have not yet submitted applications.  In its decision reversing the district court’s dismissal, the Seventh Circuit found that ECOA applies to prospective applicants.  WBK’s coverage of the Seventh Circuit ruling is available here.

If approved by the court, the CFPB’s proposed order would require Townstone to pay a penalty of $105,000 as well as prohibit the lender from any future conduct in violation of ECOA.  The CFPB filed a stipulation of dismissal against Townstone’s owner and director, who had also been named in the lawsuit.