The Consumer Financial Protection Bureau is appealing a judge's ruling
In February, Judge Franklin Valderrama of the U.S. District Court for the Northern District of Illinois granted the lender a victory, declaring the Bureau's action was invalid because the Equal Credit Opportunity Act applies only to home loan applicants, not to potential applicants.
The case was dismissed with prejudice, which meant the CFPB could not refile the complaint. However, the Bureau still maintained a right to appeal. On April 3, it filed a notice with the Seventh Circuit Court of Appeals stating it would do that.
The filing did not go into the specific reasons it elected to challenge Judge Valderrama's ruling.
The Pacific Legal Foundation, one of the attorneys representing Townstone and its owner Barry Sturner, said it was looking forward to the appeal so it could prove that the CFPB exceeded its statutory authority.
"CFPB's claims that Townstone discouraged prospective applicants were unfounded from the beginning," Steve Simpson, senior attorney with the Foundation, said in a statement. "No borrower has ever complained about Townstone's lending practices or statements on the radio."
Another attorney that represents Townstone, Marx Sterbcow, also welcomed the move.
"We are extremely excited the CFPB has decided to pursue this appeal because it shines an even brighter public spotlight on how this agency uses political agendas to formulate and execute their regulatory enforcement powers without public input," Sterbcow said. "The good news for the industry and public is that the CFPB will once again be wasting precious legal resources fighting this utterly absurd case a second time."
Pacific Legal Foundation is representing Townstone and Sturner for free; Sterbcow has also waived his fees.
"We are more than happy to take up the cause for the American public and the businesses across the country if that means the CFPB won't be venue shopping for a favorable judge while targeting some other small company they know they can crush," Sterbcow said.
The CFPB declined to comment.
However, the Center for Responsble Lending is supporting the CFPB decision to appeal, saying Judge Valderrama's ruling would make allegations of redlining immune from being challenged using ECOA.
The current Black homeownership rate of 43.7% is 28.7 percentage points lower that for whites, and is even larger than when the Fair Housing Act was passed in 1968, Mike Calhoun, CRL president noted.
"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," he said in a press release.
This case covers comments made by Sturner between 2014 and 2017 in a company-hosted radio show and podcasts that allegedly were designed to discourage Blacks from applying for mortgages with the company,
Those statements constituted illegal redlining, the CFPB said. But a plain language reading of ECOA found the statute only applies to those actually seeking credit, Judge Valderrama said.
Townstone is an outlier among mortgage companies in opting to challenge regulatory lawsuits.
In a case that raised allegations highly similar to what was brought against Townstone, a now-defunct Berkshire Hathaway subsidiary named Trident Mortgage agreed to
Among the others that elected to settle in recent years, either with federal regulators and/or fair housing groups, were:
Redlining was outlawed by the Fair Housing Act in 1968. Yet 45 years later, similar practices have been alleged to help sustain the homeownership gap between Blacks and Whites, a
