WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) yesterday announced it would appeal to the Seventh Circuit a U.S. District Judge’s February ruling that dismissed the agency’s suit against Townstone Financial, Inc., a Chicago-area nonbank mortgage lender that the agency alleges violated the Equal Credit Opportunity Act (ECOA) and the Consumer Financial Protection Act.
CFPB alleged that Townstone Financial, on a regular radio program, podcasts, and its social media platforms, discouraged Black consumers from applying for credit to purchase homes in the Chicago-Naperville-Elgin Metropolitan Statistical Area. In February, U.S. District Judge Franklin U. Valderrama ruled that ECOA only prohibits discrimination against applicants for mortgages, not prospective borrowers.
“This ruling would wipe out decades of settled law and regulation and make redlining immune from challenge under ECOA,” said Mike Calhoun, president of the Center for Responsible Lending (CRL). “The current homeownership rate for Black Americans (43.4 percent) is 28.7 percentage points lower than for white Americans (72.1) – larger than the 27 percent homeownership gap that existed in 1960, before the 1968 Fair Housing Act was enacted to end discriminatory practices based on race in housing and mortgage finance. As we commemorate the law’s enactment this Fair Housing Month, we must urge elected officials and regulators to commit to taking more aggressive action to advance housing equity, enforce fair housing rights, and end housing discrimination. This regressive ruling must be reversed.“
In February 2023, U.S. District Judge Franklin U. Valderrama ruled that ECOA only defines applicants as those who apply for credit, rather than the CFPB’s allegations centered on questions involving prospective applicants. CFPB originally filed a lawsuit on July 15, 2020 in the federal district court in the Northern District of Illinois against Townstone Financial and its president, Barry Sturner, alleging that the defendants violated the Equal Credit Opportunity Act by engaging in redlining and acts or practices that would discourage prospective applicants, on the basis of race, from applying for credit in the Chicago MSA. The agency said Townstone’s repeated use of disparaging statements on its radio program, podcasts and social media platforms would discourage prospective applicants living in majority-Black neighborhoods, or neighborhoods with a high proportion of Black residents, from applying for mortgage loans, or making or pursuing an application.
CFPB also alleged that Townstone has not targeted any of its marketing toward Black residents in the Chicago MSA, even though Black residents made up 30 percent of the city’s population. For example, the suit alleged that from 2014 to 2017, only 1.4 percent of Townstone’s mortgage applications came from Black residents in the Chicago MSA, while Black residents made up nearly 10 percent of the applicants for other mortgage lenders.
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