The Consumer Financial Protection Bureau (CFPB) recently announced that they are seeking a settlement with Townstone Financial, a Chicago-based company. This settlement would put an end to a case involving what the bureau describes as “discriminatory lending practices and redlining African American neighborhoods in Chicago.”
As part of the settlement, Townstone would be prohibited from engaging in any actions that violate the Equal Credit Opportunity Act (ECOA). Additionally, Townstone would have to pay a penalty of $105,000 into the CFPB’s victims relief fund.
Townstone has stated that they view the settlement as favorable. One key aspect of the settlement is that Barry Sturner, Townstone’s president and CEO, has been dismissed from the case. Townstone has neither admitted nor denied liability for the actions alleged in the complaint.
Sturner expressed relief at being able to put the ordeal behind him and his family. He mentioned that the past six years have been challenging for them. Steve Simpson, a senior attorney with the Pacific Legal Foundation representing Townstone, believes that the case should never have been brought in the first place. He highlighted the immense power that the federal government holds, which often leads parties to settle rather than face a prolonged legal battle.
The Pacific Legal Foundation has stated that they will continue to fight against overreach by the CFPB and other federal agencies. This resolution comes after a lengthy court battle and a July decision by the U.S. Court of Appeals for the Seventh Circuit that reinforced the Bureau’s authority to prevent discrimination against credit applicants and to discourage discrimination under the ECOA.
The CFPB’s lawsuit against Townstone alleged that the company violated Regulation B of the ECOA by drawing very few applications from African American neighborhoods in the Chicago metro area. Townstone moved to have the case dismissed in October 2020, and a federal judge ruled in their favor in February 2023. However, the CFPB decided to appeal the ruling, which ultimately led to their authority under the ECOA being reaffirmed by a three-judge panel.
The settlement agreement will still need to be approved by the court. This update includes insights from Townstone, its founder and CEO, as well as a senior attorney from the Pacific Legal Foundation representing the company.
