CFPB Moves to Vacate Redlining Settlement with Townstone

In a recently filed motion, the CFPB sought to vacate a judgment approving its settlement with Townstone Financial, Inc. over redlining allegations that stemmed from comments that the lender’s owner made on a weekly radio show.

The CFPB sued Townstone, a Chicago-based mortgage lender, in 2020 in the U.S. District Court for the Northern District of Illinois, alleging that it had violated ECOA by making statements that discouraged on a prohibited basis prospective applicants from applying for credit.  Specifically, the Bureau relied on comments that Townstone’s owner made on weekly marketing radio shows and podcasts that disparaged areas in which, according to the U.S. Census, most of the residents identified as “Black or African American.”  In 2024, the court approved a consent decree as part of which Townstone agreed to pay a $105,000 penalty and refrain from any future ECOA violation.  WBK previously covered the settlement here.

Now, the CFPB is claiming that it “discovered within its internal case files indications that the Bureau commenced and continued its investigation and litigation without a substantial predicate of actionable facts and targeted []defendants . . . based on constitutionally protected speech.”  Specifically, the Bureau argues that its initial investigation:

• identified only a handful of allegedly “discouraging” comments, none of which were explicitly and unambiguously hostile on a prohibited basis;
• recognized that racial statistical disparities in its lending did not appear to be explained by Townstone’s office location, any targeted marketing area or advertising, or business methodology or plan;
• recognized that Townstone encouraged the use of programs to help disadvantaged populations and hired racial and language minority loan-officers;
• identified no prospective applicants who complained about the statements or were even aware of them; and
• speculated that Townstone’s use of an AM talk radio station for its weekly show could innocently limit its exposure to prospective black and Hispanic loan applicants.

Nevertheless, the Bureau explained that “CFPB staff proposed to keep investigating to ‘provide an opportunity for further investigation into Townstone’s views on race and racism.’”  In the Bureau’s view, this continued investigation violated the First Amendment by improperly “target[ing] Townstone based on the political views of its owner.” 

The CFPB filed the motion jointly with Townstone, but the court still must approve the request before its prior judgment is vacated.  Given that the motion is unopposed, the court has also permitted a group of non-profit organizations to file an amicus brief to present information and arguments that it might not otherwise hear from the parties.