Consumer watchdog CFPB wants to reverse its own ruling in mortgage discrimination case

Time seems to be running backwards at the Consumer Financial Protection Bureau (CFPB). The agency is going back in time, dismissing pending cases and even seeking to vacate cases that have already been settled. Case in point: Townstone Mortgage.

Key Points

• The CFPB has asked a court to reverse a 2023 settlement it won against a mortgage lender accused of racial discrimination.

• The agency now claims the case was based on a flawed investigation and driven by misused enforcement powers.

• The CFPB wants to return the $105,000 fine it collected from Townstone Financial.

Details

In a rare legal reversal, the Consumer Financial Protection Bureau (CFPB) has filed a motion asking a federal court to void a previous enforcement action the agency successfully pursued against Townstone Financial, a Chicago-based mortgage lender accused of discriminatory marketing practices.

The case, which dates back to a 2020 complaint filed during President  Trump’s first administration, alleged that Townstone discouraged Black mortgage applicants through its marketing and public statements — a practice known as “redlining.” The company strongly denied the charges.

In November 2023, the CFPB reached a $105,000 settlement with Townstone following a court victory that had upheld the agency’s right to regulate how lenders market mortgages. It marked the first time the CFPB had brought a redlining case against a non-bank lender.

"DEI agenda"

However, current CFPB leadership, including Acting Director Russ Vought, is now condemning the agency’s earlier actions.

“The CFPB abused its power, used radical ‘equity’ arguments to tag Townstone as racist with zero evidence, and spent years persecuting them — all to further a DEI agenda,” Vought said in a statement.

In a joint filing with Townstone, the CFPB asked the court to throw out the settlement and reverse the penalties, stating that the agency’s earlier actions were based on a faulty investigation and misrepresentations by staff attorneys.

A sworn declaration from Dan Bishop, a White House budget advisor currently assigned to the CFPB, claimed that agency lawyers misled leadership and acted with bias against Townstone.

The Pacific Legal Foundation, which represented Townstone, said, “We are glad the current administration conducted an investigation and agreed to file a joint motion in this case.”

The case now awaits a federal court's decision on whether to formally vacate the settlement.