Trump-era CFPB now says settlement violated lender’s free speech rights and lacked evidence
The Consumer Financial Protection Bureau (CFPB) is asking a federal court to reverse a racial discrimination settlement it reached just months ago with a Chicago-based mortgage lender – and to return the $105,000 the company paid to resolve the claims.
Townstone Financial, a small Chicago-based lender, had been accused of discouraging mortgage applications from Black residents by the CFPB in 2020. The allegations focused on the company’s radio show, where hosts, including CEO Barry Sturner, described Chicago’s South Side as a “jungle”, a “war zone”, and a “hoodlum” hotspot on weekends. The bureau claimed these comments, along with lending data, supported a redlining case.
But now, under new Trump-appointed leadership, the CFPB says the case should never have been brought.
In a filing with the US District Court for the Northern District of Illinois, the bureau said it had identified “significant undisclosed problems” in how the case was handled. It called the complaint “unmerited” and argued that it violated the lender’s First Amendment rights.
Acting CFPB director Russell Vought said the bureau “used radical ‘equity’ arguments to tag Townstone as racist with zero evidence, and spent years persecuting and extorting them.”
The bureau is now asking the court to throw out the settlement it reached with Townstone in November 2023. Sturner had agreed to the deal to avoid the toll of ongoing litigation.
“My family and I are relieved to finally put this nightmare behind us,” he said at the time.
Sturner’s legal team is now backing the CFPB’s request to vacate the agreement, according to the New York Times.
“Now we know that CFPB knew - or should have known - it had no case and targeted Townstone for its speech,” said Steve Simpson, a lawyer at the Pacific Legal Foundation. “Justice demands that this settlement be vacated.”
The case had already gone through a legal rollercoaster. A federal judge initially dismissed it in 2023, arguing that the Equal Credit Opportunity Act didn’t apply to prospective applicants. But a three-judge appeals panel later reversed that decision, ruling the law did cover people discouraged from applying for credit.
Critics say the reversal signals a dangerous retreat from enforcing fair lending laws. Christine Chen Zinner, a senior attorney with Americans for Financial Reform, called the CFPB’s move “bananacakes.” She said the appellate ruling showed the case had merit and that dropping it “sends a clear green light to businesses that discriminatory conduct is acceptable.”
Read next: New York to toughen up laws in face of weakened CFPB
Meanwhile, others see the reversal as overdue. Norbert Michel, director at the libertarian Cato Institute, welcomed the decision, writing on social media: “Government agencies should not be in this business - and it is not accurate to call it regulation.”
The Townstone case is just one of several pulled back in recent weeks. The CFPB has dropped lawsuits against Capital One, Rocket Homes (a Berkshire Hathaway company), and a student loan servicer. This follows pressure from Trump’s Department of Government Efficiency, now led by Elon Musk, which has reportedly pushed to sideline the consumer watchdog entirely.
Capital One had been accused by the bureau of “cheating” millions of customers out of interest payments. But like other cases, that lawsuit has now been dismissed without further explanation.
As the CFPB backs away from enforcement actions filed under the Biden administration, the future of fair lending regulation may depend less on the courts, and more on politics. So far, the White House has not commented on the agency’s reversal.
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