CHICAGO – Tomorrow morning, the Seventh Circuit Court of Appeals will hear oral arguments in the appeal of a fair lending enforcement action brought by the Consumer Financial Protection Bureau (CFPB) against Chicago mortgage lender Townstone Financial. The appealed decision upends 50 years of fair lending law, concluding that lenders are free to discourage minority consumers from seeking credit without violating the Equal Credit Opportunity Act. This errant decision is not only wrong - it endangers equitable access to participation in our economy and legalizes discrimination.

Ahead of oral arguments, government watchdog Accountable.US released an analysis showing Townstone is receiving direct and indirect support from several conservative organizations and industry groups that have long-criticized the CFPB and its mandate from Congress to protect consumers from predatory practices by lenders. This includes Pacific Legal Foundation (PLF)—considered to be a member of Leonard Leo's conservative legal network—which currently represents Townstone in its legal fight against the CFPB. Pacific Legal is funded in-part by "Donors Trust," a conservative group which itself received over $71 million from the 85 Fund in 2021, which Leonard Leo has said "he plans to use to fund conservative causes nationwide."

Today, consumer advocates are calling on the Seventh Circuit to reverse this harmful decision and make it abundantly clear that credit discrimination is illegal:

“If it stands, the district court's ruling would make it easier for lenders to discriminate based on illegal factors such as race. This would unjustly deprive people of the credit they need to buy a home, start a business, or pursue other opportunities," said Mitria Spotser, vice president at the Center for Responsible Lending (CRL). "The district court’s ruling flies in the face of decades of settled law and regulation. This wildly misguided ruling should be reversed.”

“If a lender can discourage protected classes from applying for credit without fear of prosecution,” said Adam Rust, Director of Financial Services for the Consumer Federation of America, “what is to prevent them from putting a ‘whites-only’ sign out front? Laws to prevent discrimination exist to address real problems, and the half-baked theories behind Townstone do not, and the Seventh Circuit must right this wrong by siding with the CFPB.”

“A corporate mortgage lender accused of discriminatory practices has teamed up with a network of well-funded right-wing special interests to smear the Consumer Financial Protection Bureau, including a group tied to far-right legal kingpin Leonard Leo. The motivation is obvious: greed. It’s the latest chapter in the long-running scheme by corporate CEOs, lobbyists and the right-wing political groups in their pocket to roll back consumer protections so they can cheat and discriminate against working Americans with impunity to pad their profits,” said Liz Zelnick, Director of the Economic Security & Corporate Power Program at Accountable.US.

Horacio Méndez, President and CEO of the Chicago-based non-profit Woodstock Institute, said, “Racial justice activists founded Woodstock Institute in the heat of the fight against redlining and financial discrimination back in the 1970s. Over the course of the decades since, we continue to find consistent evidence that actions like Townstone’s have a significant negative impact on Black and Brown households’ ability to access financial opportunity in our city.”

"We cannot allow the Seventh Circuit to gut our right to equal credit under the law. If the ruling was allowed to stand, it would make it easier for lenders to get away with discouraging, dissuading, and steering potential applicants on the basis of their race, sex, or other protected groups. To truly provide the equal credit opportunities promised under the Equal Credit Opportunity Act, federal enforcement agencies must have the power to examine a lender’s steering and marketing behaviors," said Caroline Nagy, Senior Policy Counsel for Housing, Corporate Power, and Climate Justice at Americans for Financial Reform Education Fund.

“CFPB v. Townstone is yet another case in the string of far-right legal challenges to the CFPB’s ability to protect consumers, including through the regulation of discriminatory conduct in the financial services industry. This time, they’re seeking to weaponize the First Amendment to limit the agency’s authority and to enable their own discrimination. As our brief on behalf of First Amendment legal scholars makes clear: the First Amendment does protect the right to speak, but it does not prevent the regulation of illegal discrimination,” said Orlando Economos, Legal Fellow, Democracy Forward.

“Consumers are grateful that the CFPB is determined to see discrimination rooted out of mortgage and other forms of lending,” said Ruth Susswein, Consumer Action’s Director of Consumer Protection. “The CFPB’s appeal in the Townstone case makes clear that fair lending is not an aspiration; it is the fundamental principle.”


Press Contact: Matthew Kravitz