CFPB seeks settlement in Townstone’s financial redlining dispute
The Consumer Financial Protection Bureau (CFPB) announced Friday that it is seeking a settlement with its Chicago headquarters Townstone financial that would resolve a case involving what the agency calls “discriminatory lending practices and the rezoning of African-American neighborhoods in Chicago.”
The proposed order would prohibit Townstone from taking any action that would violate the Equal Credit Opportunity Act (ECOA) and would require Townstone to pay a $105,000 fine to the CFPB’s Victims’ Fund.
The move toward this resolution follows a lengthy court battle dating back to 2020, along with a July decision by the United States Court of Appeals for the Seventh Circuit which reaffirmed the Bureau’s authority to prohibit discrimination against credit applicants and discourage potential credit applicants under the ECOA.
“The CFPB’s lawsuit against Townstone Financial included a major victory at the appeals court, making clear that people are protected from illegal redlining even before they file,” CFPB Director Rohit Chopra said in a statement. “The CFPB will continue to prosecute those who engage in modern redlining.”
In the summer of 2020, the CFPB has filed suit against Townstonealleging that it violated Regulation B of the ECOA by receiving “almost no applications for properties in predominantly African-American neighborhoods” and “few applications from African Americans” in the Chicago metro area.
This amounted to discrimination, the CFPB said. In October 2020, Townstone decided to have the case dismissed. A federal judge in Illinois ruled in Townstone’s favor in February 2023, but the CFPB vowed to appeal, ultimately leading to his authority under the ECOA being reaffirmed by a three-judge panel.
The settlement agreement will have to be entered into by the court, which has yet to happen.
The Pacific Legal Foundation represents Townstone in this case. HousingWire contacted the foundation’s lead attorney for the case but did not immediately receive a response.
