The Consumer Financial Protection Bureau is asking a judge to vacate the case.
The primary U.S. consumer finance agency on March 26 requested that a court vacate a discrimination case the agency won in 2024, as officials said prior leadership had abused its power in prosecuting the action.
Internal records reviewed under executive orders from President Donald Trump show that the Consumer Financial Protection Bureau (CFPB) opened an investigation into Townstone Financial, a mortgage lender in Chicago, “without a substantial predicate of actionable facts,” CFPB attorney Mark Paoletta
said in a court filing.
The agency also targeted Townstone and its president, Barry Sturner, “based on constitutionally protected speech,” Paoletta stated.
That speech included Sturner’s remarks on the radio that decried certain criminal activity, Dan Bishop, a White House adviser who has been detailed to CFPB,
said in a declaration.
The agency’s original recommendation for an investigation said Townstone had never employed a black loan officer and that Sturner’s comments on the radio “could have been perceived as insulting to African-American and Hispanic listeners,” according to Bishop.
The documents were filed with the U.S. District Court for the Northern District of Illinois, which in 2024 approved a settlement that included Townstone’s promises to take action to make sure it was not racially discriminating in marketing loans, or redlining.
Townstone also agreed to pay a $105,000 penalty.
“The CFPB will continue to prosecute those who engage in modern-day redlining,” Rohit Chopra, CFPB’s director at the time, said in a statement when the settlement was filed.
Acting CFPB Director Russ Vought
said in a statement on March 26 that “CFPB abused its power, used radical ‘equity’ arguments to tag Townstone as racist with zero evidence, and spent years persecuting and extorting them—all to further the goal of mandating DEI in lending via their regulation by enforcement tactics.”
The review of the case was prompted by two orders signed by Trump on Jan. 20, the day that his second term started. One order
required the heads of agencies to “identify and take appropriate action to correct past misconduct by the Federal Government related to censorship of protected speech.”
The other
directed them to “review the activities of ... agencies exercising civil and criminal enforcement authority” and identify instances reflecting improper targeting that were “oriented more toward inflicting political pain than toward pursuing actual justice or legitimate governmental objectives.”
Bishop said in a statement that the investigation “was a flagrant misuse of government resources to destroy a small business that did nothing wrong.”
“For the crime of protected political speech, this firm was targeted and harassed for years by this rogue agency. We are righting this wrong and protecting the First Amendment,” he said.
Steve Simpson, an attorney at Pacific Legal Foundation, which represented Townstone,
said in a statement that the company knew the case was baseless and brought in violation of the First Amendment, but settled “to escape the crushing burden of many more years in litigation.”
“Now we know that CFPB knew—or should have known—it had no case and targeted Townstone for its speech,” he said. “Justice demands that this settlement be vacated.”
