Latest news with #Townstone
Yahoo
30-03-2025
- Business
- Yahoo
The CFPB fined a lender for discrimination. Now it wants to give the money back.
Late last year, the Consumer Financial Protection Bureau reached a settlement with a small mortgage lender based in Chicago, Townstone Financial, fining the company for discriminating against Black homebuyers and discouraging them from applying for loans by bad-mouthing the city's heavily African American South Side on the radio. Though Townstone was a minor firm, the case was a major court victory for the government, which described it as a blow against 'modern-day redlining' — the practice of refusing to lend in minority neighborhoods. Learn more: What is redlining, and how does it affect Black communities? In a surprise move this week, however, the CFPB asked a court to undo its settlement and dismiss the case, claiming it had discovered 'significant undisclosed problems' with the investigation that led to the suit, which it said had 'trampled' on Townstone's First Amendment rights. What's more, the agency asked the judge for permission to return $105,000 that Townstone already paid in penalties. Under Trump, the CFPB has dropped a slew of lawsuits that it filed late in the Biden administration, including ones against Capital One, the organization that runs Zelle, Rocket Homes, and other major financial institutions. But its decision in Townstone has dumbfounded former officials and consumer advocates, who struggled to think of any other example of the government attempting to scrap an enforcement case it had already effectively won and offering to refund a penalty. 'I've never seen anything like it,' said Sam Levine, the former head of consumer protection at the Federal Trade Commission during the Biden administration. Lisa Gilbert, co-president of the progressive activist organization Public Citizen, called the action 'both bizarre and appalling.' Adding to their sense of shock: The CFPB originally filed its case against Townstone in 2020 during Trump's first term under his own handpicked director, Kathy Kraninger. By subscribing, you are agreeing to Yahoo's Terms and Privacy Policy Some consumer protection activists said they were concerned about the precedent the CFPB's request might set, since it would likely encourage other companies to try reopening old, settled cases. 'I would go to the Trump administration and say, hey, you did this for Townstone Financial, can you do this for our settlement too?' said Christine Chen Zinner, senior policy counsel at Americans for Financial Reform. The CFPB did not return a request for comment. Illegal redlining or protected speech? The Townstone case largely focused on comments its executives made on an in-house weekly podcast and AM radio show they used for marketing, 'The Townstone Financial Show.' The government argued that it was essentially an extended infomercial, where the firm's owners and employees talked about issues around mortgages and homebuying — and occasionally took shots at Black neighborhoods in Chicago and surrounding Cook County. In one episode, for instance, Townstone's co-founder and CEO described Friday through Sunday on the South Side as 'hoodlum weekend' and said the police were the only ones preventing it from turning into a 'war zone.' On a different occasion, a host said that walking through the South Side at 3 a.m. would deliver 'the same rush' as skydiving. In others, the host said that people needed to 'drive very fast' and not 'look at anybody' in the nearby, mostly Black city of Markham and called a Jewel-Osco in downtown Chicago 'Jungle Jewel.' They added that the grocery store was a 'scary place' because it was packed with 'people from all over the world.' The CFPB argued that Townstone's remarks signaled it wasn't interested in issuing mortgages in Black and other minority neighborhoods, running afoul of regulations under the Equal Credit Opportunity Act that ban lenders from discouraging potential customers from applying based on race, including in their advertising. A lower court judge initially dismissed the case, finding that those regulations went beyond what Congress had intended when it passed the law. But the US Court of Appeals for the Seventh Circuit reversed and let the suit go forward, eventually leading to a settlement and fine. Though Townstone did bring up a defense that its show was protected by the First Amendment, the issue was never actually litigated. The appeals court win and penalty made 'clear that people are protected from illegal redlining even before they submit their application,' then-CFPB Director Rohit Chopra said last November. Conservative groups had long seen the case as an injustice, however. In 2023, researchers at the Competitive Enterprise Institute published an op-ed in The Wall Street Journal arguing that the CFPB was misusing antidiscrimination laws to essentially censor speech about crime in Chicago, and compared the comments from Townstone's executives to when the city's own mayor recalled having to shield his children 'from bullets that fly right outside our front door.' This January, the group argued in the Washington Examiner that Trump's CFPB should 'take the unusual but warranted step of rescinding' the fine that Townstone paid and 'perhaps provide compensation to the firm for the disruption of its business.' The CFPB, which has largely shut down operations under the second Trump administration, now says the suit should never have been brought. On Wednesday, it filed a motion in which it said officials had conducted a review of the suit's history and found that Townstone had been unfairly 'targeted' based on 'constitutionally protected speech.' The motion accuses investigators of essentially cherry-picking a handful of comments on the company's show, pointing out that the government used audio analysis software to find 16 minutes of content from more than 78 hours of tape. The CFPB also never found any potential borrowers who actually claimed to have been discouraged from taking a loan, it noted. In a statement Wednesday, the acting CFPB Director Russ Vought suggested that the agency's reversal was part of the administration's broader effort to undo diversity, equity, and inclusion policies in the public and private sector. 'The 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,' he said. A powerful message Progressive consumer advocates told Yahoo Finance that they were fearful the case signaled it would now be open season for lenders who want to discriminate against borrowers. 'Dropping this settlement sends a crystal clear message to businesses that discriminatory conduct is somehow now allowed,' said Public Citizen's Gilbert. It is unclear whether US District Judge Franklin Valderrama, who is overseeing the case, will grant the government's request to roll back its own settlement. If he does, it may set a template for the Trump administration to try to undo other old settlement deals. John Berlau, the Competitive Enterprise senior fellow who advocated for the case to be reversed, said he thought it was unlikely that Trump would try to upend many old settlements. The Townstone executives were 'victims of an egregious, unconstitutional prosecution' that required extraordinary action, he argued. Commercial advertisements usually receive a lower level of protection under the First Amendment than political speech. But Berlau said that Townstone's program was no different than other podcasts run by business owners aimed at a general audience. 'I think this sends a powerful message to agencies not to weaponize the law against free speech rights,' Berlau said. Jordan Weissmann is a Senior Reporter at Yahoo Finance. Sign up for the Mind Your Money newsletter
Yahoo
29-03-2025
- Business
- Yahoo
CFPB pushes to vacate Townstone settlement, refund mortgage lender
This story was originally published on Banking Dive. To receive daily news and insights, subscribe to our free daily Banking Dive newsletter. The Consumer Financial Protection Bureau has asked a federal judge to vacate a settlement with Townstone Financial and return $105,000 to the mortgage firm accused of redlining. The CFPB's chief legal officer, Mark Paoletta, and attorneys for Townstone filed a joint motion for relief Wednesday to vacate the final judgment and order issued in November in the U.S. District Court for the Northern District of Illinois. '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,' Acting Director Russ Vought said in a statement. Since the new administration has taken over, the CFPB has dropped nine lawsuits that the agency brought on behalf of consumers. In February, it dismissed its lawsuit against Capital One, after the Biden-era iteration of the CFPB accused the bank of misleading consumers about a savings account product. It has also dismissed cases against JPMorgan Chase, Bank of America, Wells Fargo and SoLo Funds. 'The more we uncover at CFPB, the more we see how this agency was weaponized against targeted Americans,' Vought said. The case against Townstone was brought by former CFPB Director Kathleen Kraninger, an appointee from President Donald Trump's first term. The CFPB claimed it found 'significant undisclosed problems' with the bureau's treatment of this case that resulted in 'unmerited investigation and litigation' and violated the defendants' First Amendment rights of free speech. The CFPB accused Chicago-based Townstone of discouraging residents living in majority-Black neighborhoods from applying for mortgages in the city's metropolitan area through its comments made on its radio show and podcast. In a June 2016 episode of the Townstone Financial Show, the company's CEO, Barry Sturner, described Chicago's South Side between Friday and Monday as 'hoodlum weekend' and suggested that police are the only barrier preventing it from becoming a 'real war zone.' The South Side is a majority-Black area, with roughly 489,000 African-American residents. The CFPB said the agency had pinned down 16 minutes of the program's nearly 79 hours of radio content that they considered 'disconcerting' and inappropriate. 'What was so disconcerting? Talking about local crime, political issues around freedom of speech, supporting local law enforcement, and telling people to check out a neighborhood before buying a home,' the CFPB noted. Initially, a federal court dismissed the lawsuit in 2023, ruling that the Equal Credit Opportunity Act only protected actual loan applicants, not potential ones. However, the U.S. Court of Appeals for the Seventh Circuit overturned this decision, finding that the law protects prospective credit applicants. 'My family and I are relieved to finally put this nightmare behind us,' Sturner said in a statement after the case was settled in November. 'The last six years have taken a toll on all of us.' The CFPB did not mention that Sturner agreed to settle the case without approving or denying the allegations brought by the agency. 'We don't know if CFPB is doing other internal investigations, but we think they should,' Steve Simpson, director of separation-of-powers litigation at Pacific Legal Foundation, the law firm that represented Townstone in the lawsuit, said via email. 'Congress should get involved as well. One case like Townstone is too many. But where there is one, there are likely more.' Sign in to access your portfolio
Yahoo
28-03-2025
- Business
- Yahoo
US consumer agency seeks to vacate discrimination case it had already won
By Douglas Gillison (Reuters) - The top U.S. consumer finance agency on Wednesday asked a court to undo an enforcement case which the watchdog had already won last year, accusing prior agency officials of abusing their power as they sought to enforce diversity, equity and inclusion in lending. Following a case initially brought in 2020 during President Donald Trump's previous administration, the Consumer Financial Protection Bureau in November won a settlement with the Chicago mortgage lender Townstone Financial, which the agency had accused of racial discrimination in the marketing of loans. "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 Russ Vought said in a statement. The CFPB said it is also seeking to return the $105,000 penalty to Townstone. CFPB workers and consumer advocates are currently suing to block the Trump administration's efforts to neutralize the agency. The settlement followed the CFPB's legal victory before an appeals court, which had upheld the agency's right to pursue claims of racial discrimination in how companies market their mortgages. It was the CFPB's first such case against a non-bank mortgage lender. "All we have to add is that we are glad that the current administration conducted an investigation and agreed to file a joint motion in this case," said a representative for the Pacific Legal Foundation, which represented Townstone in the case. In a motion filed in federal court, the Consumer Financial Protection Bureau and Townstone jointly said the agency's case had been based on a faulty investigation and never should have been brought. In a sworn declaration, Dan Bishop, an advisor in the White House Office of Management and Budget currently detailed to the CFPB, also said agency lawyers had "misled their superiors in enforcement decisions" and were affected by "animus" toward Townstone. In 2020, the CFPB accused Townstone of "redlining," effectively discouraging mortgage applications from Black applicants and for homes in majority-Black neighborhoods by disparaging such neighborhoods in allegedly racial terms, allegations the company rejected. Kathy Kraninger, who was CFPB director at the time, and Thomas Ward, then the director of enforcement, did not immediately respond to requests for comment. Sign in to access your portfolio
New York Times
27-03-2025
- Business
- New York Times
Consumer Bureau Seeks to Undo Settlement and Repay Mortgage Lender
Under President Trump, the Consumer Financial Protection Bureau has dropped nearly a dozen enforcement cases brought during the Biden administration, ending lawsuits against banks and lenders for a variety of financial practices that the watchdog agency no longer considers illegal. But on Wednesday, the bureau went a step further: It is seeking to give back $105,000 that a mortgage lender paid to settle racial discrimination claims last fall. In an especially strange twist, the case — against Townstone Financial, a small Chicago-based lender — was brought during Mr. Trump's first term by Kathleen Kraninger, the director he appointed to run the consumer bureau. Russell Vought, who became the agency's acting director last month, said it had 'used radical 'equity' arguments to tag Townstone as racist with zero evidence, and spent years persecuting and extorting them.' In its filing asking the U.S. District Court for the Northern District of Illinois to set aside the settlement it approved in November, the bureau said it had found 'significant undisclosed problems' in its handling of the lawsuit, which the new leadership called an 'unmerited' complaint that violated the defendants' First Amendment free-speech rights. The case began in 2020 when the consumer bureau accused Townstone of redlining and breaking fair-lending laws by discouraging residents living in majority-Black neighborhoods from applying for its housing loans. It homed in on comments made during the company's radio show and podcast, 'The Townstone Financial Show,' saying they were intended to rebuff Black borrowers or those seeking to buy homes in certain neighborhoods. Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times. Thank you for your patience while we verify access. Already a subscriber? Log in. Want all of The Times? Subscribe.
Yahoo
27-03-2025
- Business
- Yahoo
US consumer agency seeks to vacate discrimination case it had already won
By Douglas Gillison (Reuters) - The top U.S. consumer finance agency on Wednesday asked a court to undo an enforcement case which the watchdog had already won last year, accusing prior agency officials of abusing their power as they sought to enforce diversity, equity and inclusion in lending. Following a case initially brought in 2020 during President Donald Trump's previous administration, the Consumer Financial Protection Bureau in November won a settlement with the Chicago mortgage lender Townstone Financial, which the agency had accused of racial discrimination in the marketing of loans. "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 Russ Vought said in a statement. The CFPB said it is also seeking to return the $105,000 penalty to Townstone. CFPB workers and consumer advocates are currently suing to block the Trump administration's efforts to neutralize the agency. The settlement followed the CFPB's legal victory before an appeals court, which had upheld the agency's right to pursue claims of racial discrimination in how companies market their mortgages. It was the CFPB's first such case against a non-bank mortgage lender. "All we have to add is that we are glad that the current administration conducted an investigation and agreed to file a joint motion in this case," said a representative for the Pacific Legal Foundation, which represented Townstone in the case. In a motion filed in federal court, the Consumer Financial Protection Bureau and Townstone jointly said the agency's case had been based on a faulty investigation and never should have been brought. In a sworn declaration, Dan Bishop, an advisor in the White House Office of Management and Budget currently detailed to the CFPB, also said agency lawyers had "misled their superiors in enforcement decisions" and were affected by "animus" toward Townstone. In 2020, the CFPB accused Townstone of "redlining," effectively discouraging mortgage applications from Black applicants and for homes in majority-Black neighborhoods by disparaging such neighborhoods in allegedly racial terms, allegations the company rejected. Kathy Kraninger, who was CFPB director at the time, and Thomas Ward, then the director of enforcement, did not immediately respond to requests for comment.
