Government’s illegal power grab and racial equity agenda threaten lenders’ rights

Townstone Financial is more than Barry Sturner’s business. It’s a fusion of his entrepreneurial spirit, his love of Chicago, and his passion for helping people through housing. By his estimate, Townstone has uplifted the lives of as many as 30,000 customers over the past 20 years.

“There’s no better feeling than helping someone buy a house, refinance their house, or pay off their house to get out from under the financial stress hanging over their heads,” he says.

Now, however, something far bigger hangs over Barry and Townstone: a ginned-up federal lawsuit that tars them as racist, censors their speech, and tramples their rights. Like many small lending firms, Townstone’s marketing was largely word-of-mouth until 2011, when Barry’s then-partner was offered a Sunday morning time slot on a Chicago radio station to host “The Townstone Financial Show.” The one-hour financial advice talk show was a unique way to engage Chicagoans.

Joined by callers and in-studio guests, the hosts discussed homeownership, and, like all talk radio, they often mixed in discussions of sports, movies, restaurants, and community events. The show also tackled timely and sometimes controversial topics, such as policing and crime, which somehow caught the attention of the Consumer Financial Protection Bureau (CFPB).

Created by the Dodd-Frank Act in the aftermath of the 2008 financial crisis, the CFPB is one of the most powerful federal agencies ever created. Congress gave it enforcement power over 18 different consumer protection laws previously administered by seven different federal agencies. It insulated the agency from presidential oversight. And it authorized the CFPB to essentially mandate its own funding.

The Supreme Court recently made the agency more accountable to the president, yet the CFPB still possesses vast, largely unchecked, power. Its current chairman, Rohit Chopra, is leaving no regulation unturned in his constant pursuit of even more power.

In 2020, after an investigation, the agency sued Townstone. The federal lawsuit claimed a handful of on-air comments made by Townstone employees over four years of radio shows and podcasts “would discourage” someone from applying for credit.

The remarks accounted for maybe 10 of the show’s 10,000 minutes of airtime and included Barry’s referencing Chicago’s South Side as a “war zone.” While provocative, his observation merely echoed the mayor and many others who share his concerns about crime.

The CFPB knew it couldn’t bring an Equal Credit Opportunity Act (ECOA) case—the ECOA outlaws discrimination against credit applicants, which the radio comments did not do. Instead, the agency plucked the comments out of context and spun them in the most misleading manner to cobble together a lawsuit using another regulation called Regulation B.

According to the agency’s current interpretation, Regulation B extends the ECOA to mere statements that could discourage prospective applicants, intentionally or not. In other words, the agency is twisting Regulation B to ensnare the most compliant businesses in the heavily regulated finance industry. But Congress didn’t give the CFPB this kind of power.

In these times when people readily take offense at nearly anything they hear, someone could no doubt portray a Townstone statement as offensive. Barry is an outspoken conservative who supports Trump and the police. He’s also a frequent critic of Elizabeth Warren, the architect of the CFPB. His views no doubt annoyed some listeners—especially when crime, policing, and Trump were hot-button issues in America.

In its lawsuit, the CFPB pointed to an alleged lack of African American applicants as proof of discrimination.

Now, Townstone must either give in to the government’s pressure and settle or endure a crushingly expensive lawsuit to fight back. The odds of surviving a court battle are so overwhelming that large companies typically settle to save face and avoid controversy while small companies settle to avoid ruin. As a result, the agency’s unilateral, unlawful expansion of the law nearly always escapes court scrutiny.

The government cannot prevent companies from speaking about important public issues like neighborhood crime, and under our Constitution’s separation of powers, lawmaking is the job of Congress, not federal agencies.

Despite plummeting mortgage rates and a drained bank account, Barry is fighting back. With free representation by PLF, he is determined to break the government’s sue-and-settle scheme and end its illegal lawmaking.

“Townstone is on life support right now because the government crossed the line,” Barry says. “This agency wants to act as the judge and jury and make up laws, too. Enough is enough.”

“The government cannot force its views on others and agencies cannot make up their powers as they go along,” says PLF senior attorney Steve Simpson. “If the CFPB succeeds, mortgage lenders will face liability anytime they say something that may offend people in high-minority neighborhoods.”

A win for Barry would not only restore the rule of law and the free speech rights of all lenders, but also the reputations tarnished by the government’s charade.

“I always thought that there was a limit to what people can lie about, but I thought wrong,” Barry says. “The government has denigrated Townstone’s reputation, my reputation, and our 20-year history of helping people. That’s what I’m trying to get back.”