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The Consumer Financial Protection Bureau (CFPB) has filed a proposed order to resolve charges that Townstone Financial, a nonbank mortgage broker and lender, intentionally discriminated against predominantly Black neighborhoods in Chicago in violation of the Equal Credit Opportunity Act.

If entered by the court, the proposed order would require the Chicago-based company to pay a $105,000 penalty to the CFPB’s victims relief fund. The CFPB cited a July 2024 decision from the US Court of Appeals for the Seventh Circuit against the company, which claimed Townstone Financial actively discouraged potential mortgage applicants because of their race or the racial composition of where they lived or sought to live between 2014 and 2017.

“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 in a statement. “The CFPB will continue to prosecute those who engage in modern-day redlining.”

Steve Simpson, director of Separation of Powers Litigation at Pacific Legal Foundation – which represented Townstone free of charge in the lawsuit – noted the company’s acceptance of the agreement was not an admission of wrongdoing but a desire to avoid a prolonged and costly legal fight.

“This case should never have been brought,” Simpson said. “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.”

“My family and I are relieved to finally put this nightmare behind us,” added Barry Sturner, president and CEO of Townstone Financial. “The last six years have taken a toll on all of us.”