A federal judge is maintaining his settlement ruling against mortgage broker Townstone Financial, denying a request from the Trump administration's new leadership at the Consumer Financial Protection Bureau.
In 2020, the bureau accused Chicago-based Townstone Financial of engaging in so-called redlining by discouraging Black mortgage applicants through its advertisements and radio show between 2014 and 2017, arguing that it violated the Equal Credit Opportunity Act.
Judge Franklin U. Valderrama in 2024 ordered Townstone to pay a $105,000 settlement, but the CFPB announced in March it would file a request to reverse what it called an “abusive, unjust case.”
“CFPB abused its power, used radical ‘equity’ arguments to tag Townstone as racist with zero evidence, and spent years persecuting and extorting them — all to further the goal of mandating DEI in lending via their regulation by enforcement tactics,” CFPB Acting Director Russell Vought said in a statement at the time.
The CFPB did not respond to a request to comment.
The attempt at reversing the settlement is the first effort through the courts by the CFPB under President Donald Trump to undo an already won case. It comes as the bureau reviews and addresses past rulings. The case was filed initially during the first Trump administration.
Judge Valderrama wrote in his latest ruling, issued Thursday, that “granting the motion would erode public confidence in the finality of judgments,” and continued to explain that reversing this settlement would begin a precedent for new administrations to revert resolutions in the future, and, “that is a Pandora’s box the court refuses to open.”
Townstone, its lawyers and the current CFPB argued the lawsuit was directed at the brokerage in the first place because of its political stance and that it infringed on its First Amendment rights. They came to the conclusion, after recent review, that the complaint showed no substantial evidence that Townstone had engaged in redlining behavior.
The term "redlining" refers to a discriminatory practice where financial institutions deny services such as home mortgages to residents of certain neighborhoods, often based on race.
“I think it was an extraordinary circumstance that the CFPB stated in its own investigation documents that it did not have evidence of intentional discrimination, and the CFPB’s own declaration shows it clearly targeted Townstone because it did not like its political speech,” said Townstone defense attorney Richard Horn of Garris Horn in an emailed statement to Homes.com. “If there is a Pandora’s box of cases like Townstone, I think it should be opened.”
The case
In the 2020 complaint filed against Townstone, the CFPB noted the brokerage generated 90% of its mortgage applications from its radio advertising and podcast, hosted by CEO Barry Sturner, loan officers and Townstone’s former vice president on a local Chicago station produced by Salem Media Group, a self-described conservative Christian media company.
The original complaint cited multiple comments made on the radio show and podcast by Sturner and other hosts.
One comment by Sturner said police are “the only ones between that turning into a real war zone and keeping it where it’s kind of at,” referring to the South Side of Chicago and its large population of Black residents.
Townstone also received 1.4% of its total mortgage applications from 2014 to 2017 from Black borrowers, compared to 9.8% from other brokers in the same metropolitan area, according to a court filing.
Sturner told Homes.com in an emailed statement he was “disappointed” by the latest ruling but that he respects it.
“Hoping the current CFPB led by Russ Vought releases more documents on the case so the public can judge for themselves as to what occurred and congressional hearings take place,” said Sturner.
The CFPB is a federal agency launched in 2011 that serves as a watchdog for consumer financial products, such as banks. Vought, also director of the Office of Management and Budget, reportedly made moves to dismantle the bureau at the behest of Trump, but that has raised legal challenges. For example, Vought has attempted to lay off CFPB employees since February, according to internal emails obtained by National Public Radio. The move sparked an investigation by the Federal Reserve’s inspector general, CNBC reported Thursday.
On April 4, a group of housing advocates filed a memorandum of amici curiae, where an individual or group can provide additional information about a legal case, in support of blocking the ruling. The group included the National Fair Housing Alliance and the American Civil Liberties Union.