Townstone wins order to dismiss CFPB’s redlining lawsuit 

A federal choose in Illinois dominated in favor of Townstone Monetary Inc. and its proprietor, Barry Sturner, on a movement to dismiss with prejudice a redlining lawsuit filed by the Shopper Monetary Safety Bureau (CFPB). 

In July 2020, the CFPB filed a lawsuit accusing the nonbank retail lender of discouraging potential African American debtors within the Chicago metropolitan space from making use of for mortgages. 

Townstone filed the movement to dismiss in October 2020, which was granted on Friday by Choose Franklin U. Valderrama within the U.S. District Courtroom for the Northern District of Illinois, Jap Division. 

The CFPB declined to touch upon the choice, for which it could actually attraction.  

Beginning as early as 2014, Townstone marketed its providers by way of its radio present and podcast. The lawsuit dropped at gentle feedback made by Sturner on the present, referring to majority-African-American neighborhoods because the “jungle,” “scary,” and locations the place you “drive very quick,” and “you don’t have a look at anyone or lock on anyone’s eyes.” 

In a press release to HousingWire, Sturner mentioned, “Townstone doesn’t discriminate and nobody has ever complained about something Townstone mentioned on its radio present.” 

The lawsuit additionally contains information displaying that Townstone drew about 2,700 candidates from 2014 to 2017, with just one.4% of the entire coming from African American residents within the Chicago metropolitan space. Throughout the identical interval, Townstone drew a median of 5 or 6 purposes every year for properties in majority African American neighborhoods, regardless of such neighborhoods accounting for 13.8% of the Chicago metropolitan space.  

In response to the CFPB, the lender’s acts and practices allegedly violated the Equal Credit score Alternative Act (ECOA), Regulation B and the Shopper Monetary Safety Act. 

The ECOA, enacted in 1974, states it “shall be illegal for any creditor to discriminate towards any applicant, with respect to any facet of a credit score transaction—on the premise of race, shade, faith, nationwide origin, intercourse or marital standing, or age.” 

Congress directed the Federal Reserve Board, consequently the CFPB, to make rules to hold out the needs of the ECOA. 

It resulted in Regulation B, which says, “A creditor shall not make any oral or written assertion, in promoting or in any other case, to candidates or potential candidates that will discourage on a prohibited foundation an inexpensive particular person from making or pursuing an software.” 

In response to Townstone, the CFPB, by way of its lawsuit, “improperly makes an attempt to increase the ECOA’s attain past the “categorical” and “unambiguous” language of the statute. 

Defendants mentioned the ECOA regulates conduct towards credit score candidates. It doesn’t regulate conduct regarding “potential candidates who haven’t but utilized for credit score.”  

In his choice, Choose Valderrama mentioned, “the CFPB can not amend its pleading in a manner that will change the language of the ECOA.” 

Steve Simpson of the Pacific Authorized Basis, who acted as counsel for Townstone, mentioned in a press release to HousingWire that “no company, together with CFPB, has the authority to rewrite a regulation prohibiting discrimination towards credit score candidates into one which makes an attempt to ban non-discriminatory conduct and speech.”

“Sadly, we needed to spend years preventing CFPB over a case that ought to by no means have been introduced. Hopefully, the court docket’s choice will stop others from having to endure what we’ve,” Sturner mentioned.