Townstone To Pay $105K In Redlining Settlement
Mortgage broker Townstone Financial is set to pay a $105,000 penalty to resolve redlining allegations in Chicago.
The Consumer Financial Protection Bureau filed a proposed order to resolve its case against Townstone for discriminatory lending practices and redlining in predominantly Black Chicago neighborhoods.
The order would stop Townstone from “taking any actions that violate the Equal Credit Opportunity Act” and require it to pay $105,000 to the CFPB’s victim relief fund.
The CFPB says the action follows “lengthy” litigation that ended in the Bureau’s favor.
“The CFPB’s lawsuit against Townstone Financial included a major appellate court victory that makes clear that people are protected from illegal redlining even before they submit their application,” said CFPB Director Rohit Chopra. “The CFPB will continue to prosecute those who engage in modern-day redlining.”
Beginning in 2020, the CFPB said Townstone Financial was discouraging Black people from applying for mortgages and avoiding predominantly Black neighborhoods, which it allegedly publicly described as the “jungle” and crime-ridden.
A district court previously dismissed the case, but the CFPB appealed. The Court of Appeals held unanimously that “an analysis of the text of the ECOA as a whole makes clear that the text prohibits not only outright discrimination against applicants for credit, but also the discouragement of prospective applicants for credit.”
Townstone ceased mortgage lending in 2018 during the CFPB’s investigation and now functions solely as a broker.
“This case should never have been brought. Unfortunately, the federal government possesses vast resources and the power to destroy lives and livelihoods, so settling is often the best approach for anyone facing a lawsuit of this kind,” Steve Simpson, director of Separation of Powers Litigation at Pacific Legal Foundation, said in a statement.
Pacific Legal Foundation, a public interest law firm that “defends Americans’ liberties when threatened by government overreach and abuse,” represented Townstone free of charge.
The organization has received funding from conservative donors such as the Koch Network, the Exxon/Mobil Foundation, the Adolf Coors Foundation, Dunn’s Foundation for the Advancement of Right Thinking, and the Sarah Scaife Foundation.