Feb. 3, 2023 (Staff Writer) — Earlier today, a District Court in Chicago ruled in CFPB v. Townstone Financial Inc. and Barry Sturner that the Equal Credit Opportunity Act (ECOA) does not extend to prospective applicants under a plain language reading of the statute. The Court dismissed the CFPB’s complaint with prejudice, meaning the Bureau cannot bring the case against Townstone in the future.
In 2020, the CFPB filed a federal lawsuit against Townstone claiming that the company violated a fair lending law by discriminating against African Americans. It was the first public redlining action brought by the Bureau against a non-bank mortgage lender. In the lawsuit, the CFPB claims that a handful of comments Townstone employees made on a radio show over a four-year period “would discourage” people from minority neighborhoods from applying for loans.
While the case has been working its way through the judicial process, the CFPB, DOJ, OCC, and state attorneys general have racked up a number of large dollar redlining settlements with both bank and non-bank mortgage lenders using the same theory of liability.
This is a clear setback for the Bureau’s “redlining” theory used against independent mortgage banks (IMBs), which relies on the discouragement of prospective applicants rather than demonstrating discrimination towards actual applicants. The judge ruled that “the ECOA unambiguously prohibits discrimination of ‘applicants,’ and not ‘prospective applicants,'” which it found was a complete bar to the Bureau’s chances of prevailing in this case. The Townstone case had been closely watched as one of the first to be litigated under the Bureau’s theory. It is expected that any future litigants would point to this opinion unless modified on appeal.
It is believed that The Bureau plans to appeal to the 7th Circuit Court and if they lose, they can appeal directly with the Supreme Court. The outcome of this case will have far-reaching implications for fair lending initiatives, including the DOJ’s recently announced “Combatting Redlining Initiative.”
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I think it is sad and greedy that we are taking farm land , destroying acres of trees and fruit groves to cram in hundreds of homes on top of each other. There are so many empty homes out there that could be rebuilt into beautiful living spaces .