Townstone Financial agrees to settle redlining case

Both
the
Consumer
Financial
Protection
Bureau
and
Townstone
Financial
claimed
victory
in
the
contentious
anti-redlining
lawsuit
as
the
mortgage
lender
agreed
to
pay
a
$105,000
penalty
to
settle
the
case.

The
money
will
go
into
the
CFPB
Victim
Relief
Fund.

“This
case
should
never
have
been
brought,”
said
Steve
Simpson,
director
of
separation
of
powers
litigation
at
the
Pacific
Legal
Foundation,
which
represented
Townstone
free
of
charge.

“Unfortunately,
the
federal
government
possesses
vast
resources
and
the
power
to
destroy
lives
and
livelihoods,
so
settling
is
often
the
best
approach
for
anyone
facing
a
lawsuit
of
this
kind,”
Simpson
continued
in
a
statement.

A
week
ago,
both
sides
wrote
the
court
stating


they
were
in
negotiations
to
settle
the
complaint.

The
agreement
also
dismisses
the
charges
against
Townstone
President
and
CEO
Barry
Sturner,
whose
comments
on
a
Chicago-area
radio
program
allegedly
disparaging
Black
people
was
the
genesis
of
the
CFPB
complaint.

“My
family
and
I
are
relieved
to
finally
put
this
nightmare
behind
us,”
Sturner
said
in
the
statement. “The
last
six
years
have
taken
a
toll
on
all
of
us.”

“Townstone
neither
admits
nor
denies
the
allegations
in
the
Amended
Complaint,
except
as
specified
in
this
Order,”
the
settlement
agreement
stated. “For
purposes
of
this
Order,
Townstone
admits
the
facts
necessary
to
establish
the
Court’s
jurisdiction
over
it
and
over
the
subject
matter
of
this
action.”

In
February
2023,
Townestone
received
an
initial
victory
in
the
case
as
Judge
Franklin
U.
Valderrama
of
the
U.S.
District
Court
for
the
Northern
District
of
Illinois


ruled
that
the
CFPB’s
suit
was
invalid
because
the
Equal
Credit
Opportunity
Act
applies
only
to
actual
home
loan
applicants,
not
to
potential
applicants.  

But
that
decision
was


overturned
by
the
Seventh
Circuit
Court
of
Appeals
in
July,
which
ruled
that
ECOA
did
apply
to
prospective
customers.

“The
CFPB’s
lawsuit
against
Townstone
Financial
included
a
major
appellate
court
victory
that
makes
clear
that
people
are
protected
from
illegal
redlining
even
before
they
submit
their
application,”
said
Director
Rohit
Chopra
in
a
statement. “The
CFPB
will
continue
to
prosecute
those
who
engage
in
modern-day
redlining.”

But
the
PLF
threw
down
the
gauntlet,
declaring
that
the
CFPB
will
continue
to
exceed
its
authority
and
it
will
fight
back,
looking
to
end
federal
agency
overreach.

The
Townstone
agreement
follows
other
recent
settlements,
including


with
Fairway
Independent
Mortgage
for
$10
million
and


OceanFirst
Bank
for
$15
million.