Courts should allow CFPB to vacate case against small mortgage firm

U.S. District Judge Franklin Valderrama on June 12 denied a request by the Consumer Financial Protection Bureau to vacate a Biden-era settlement against the Chicago-based mortgage finance firm Townstone Financial. The CFPB had accused Townstone of redlining and discrimination based on the comments of Townstone associates about neighborhood crime on the firm’s radio show and podcast, raising First Amendment and weaponization concerns.  CEI financial policy experts urged the CFPB to appeal the ruling.

Statement by John Berlau, CEI Director of Finance Policy:

“The CFPB under the leadership of Acting Director Russ Vought is correct and should be commended for seeking to vacate the lawsuit against the small mortgage finance firm Townstone Financial and return the unjust penalty of $105,000 that the CFPB had levied against the company. The CFPB should appeal against this unfortunate and flawed ruling that overlooked the new leadership’s findings that CFPB officials under previous administrations withheld information from Townstone during litigation and targeted Townstone for its political views

“The CFPB had charged Townstone with violating anti-discrimination laws simply for speaking frankly about crime in Chicago neighborhoods as expressed on the firm’s radio show and podcast. As my colleague Stone Washington and I pointed out in the Wall Street Journal and Washington Examiner, the fears expressed by Townstone associates about Chicago crime were essentially no different than concerns articulated by the city’s progressive mayor Brandon Johnson. The CFPB’s enforcement action threatened to set a terrible precedent with the potential to curb First Amendment activity, as it would have meant that any opinion a financial professional expressed on a podcast or social media venue could be subject to CFPB punishment.

“This persecution of this small firm for its views, not the CFPB’s action to vacate the case, was the real ‘legal hara-kiri,’ to use Judge Valderrama’s phrasing. And that’s why the CFPB should immediately appeal this ruling.”

Statement by Stone Washington, CEI Research Fellow:

“Judge Valderrama’s decision denying the request to vacate the Townstone settlement is disappointing, predicated on the erroneous belief that a motion to vacate would be politically motivated. However, the true political motivation stemmed from the CFPB’s initial targeting of Townstone CEO Barry Sturner and associates. Using a sophisticated algorithm, the CFPB cherry-picked 16 minutes of Sturner’s 79 hours of radio content, citing it as racially discouraging language. The reality is that Sturner’s words represented valid concerns about Chicago-area crime of interest to any prospective homeowner.

“In his ruling, Judge Valderrama overlooks the insidiousness of the CFPB’s targeting and diminishes the severity of the $105,000 penalties imposed against Townstone. This crippling settlement and bureaucratic pressure from CFPB ultimately put Townstone out of business. Townstone should have unequivocally met the ‘extraordinary circumstances’ standard to warrant vacatur. The CFPB should immediately appeal this decision, continuing its efforts to unravel past unjust enforcement actions.”