CFPB admits misstep, files joint motion to vacate baseless Townstone settlement

Washington, DC; March 26, 2025: Today, the Consumer Financial Protection Bureau (CFPB) jointly moved with Townstone Financial Inc. to vacate its settlement with the company and return the $105,000 fine paid by Townstone. The motion is the result of an internal investigation CFPB recently conducted, which concluded that the lawsuit against Townstone was legally and factually baseless and that agency staff misled their superiors and targeted Townstone for its speech. 

“For seven years, Townstone argued that the case against it was baseless and violated the First Amendment,” said Steve Simpson, an attorney at Pacific Legal Foundation. “Townstone 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. Justice demands that this settlement be vacated.”  

CFPB launched its original investigation of Townstone in 2017 and later sued the company in federal district court in Chicago. CFPB accused Townstone of violating the Equal Credit Opportunity Act — which prohibits lenders from discriminating against applicants — by making a handful of statements on a radio show and podcast about crime in Chicago. CFPB also claimed that Townstone had too few African American loan applicants and employed too few African American loan officers.  

Townstone vigorously contested CFPB’s claims during the seven-year investigation and lawsuit, arguing that the ECOA does not mandate lending or hiring on the basis of race and that CFPB’s suit was a blatant example of unconstitutional viewpoint discrimination.   

Among other things, CFPB’s recent investigation into the Townstone matter revealed that: 

• CFPB targeted Townstone based on its small size and the fact that it had a weekly radio show and podcast and had never employed an African American loan officer (even as CFPB recognized Townstone had employed Spanish- and Chinese-speaking loan officers). 

• CFPB used an audio analytics mining software called Nexidia to term-search over five years’ worth of Townstone’s radio show and podcast content. CFPB mined six comments — which amounted to 16 minutes out of 78.5 total hours of content, or 0.33% of the total content of the show — that CFPB staff considered “disconcerting” because they “could be interpreted as inappropriate, incorrect, or insensitive.” 

• CFPB staff described “[m]uch of the content of the show” as “overtly political, and often highly critical of the Bureau.” Political speech is fully protected under the First Amendment, as is criticism of a government agency, whether or not that speech may offend someone. Nonetheless, CFPB lawyers concluded that Townstone’s speech constituted an unprotected commercial transaction.  

• CFPB had no evidence that anyone was deterred from seeking credit from Townstone or even offended by its comments. Yet CFPB decided to continue its investigation to “provide an opportunity for further investigation into Townstone’s views on race and racism.”  

• Apparently, viewing the Townstone matter as a necessary example to the rest of the industry, enforcement staff believed that “given the gravity of intentional discrimination in the consumer financial marketplace (here, potentially with animus) there is strong need for deterrence.” 

• Following the unrest in the wake of George Floyd’s death in May 2020, CFPB employees saved captures of tweets posted by Townstone’s owner, Barry Sturner. A pdf capture of the account profile page is filenamed “Townstone Fin Tweets BS posts that he was victim of police.pdf.” Another capture, bearing a last-modified date of June 8, 2020, and filenamed “Townstone tweet from June 2.pdf,” features Townstone’s owner expressing opposition to looting. 

“CFPB refused to produce information during the lawsuit concerning its investigation of Townstone and, unfortunately, the magistrate judge sided with CFPB in that dispute,” said Ashley Levine, attorney at Pacific Legal Foundation. “If not for CFPB’s recent internal investigation, it is likely the information we now have would never have come to light.”  

The case is CFPB v. Townstone.