CFPB sues Chicago mortgage company for discrimination

by Ryan Smith20 Jul 2020

The Consumer Financial Protection Bureau has filed a lawsuit against a Chicago-based nonbank mortgage lender for allegedly engaging in discriminatory practices.

The CFPB has sued Townstone Financial for alleged violations of the Equal Credit Opportunity Act (ECOA) and the Consumer Financial Protection Act (CFPA). The ECOA prohibits mortgage lenders from discriminating against applicants on the basis of race, color, national origin, “or other prohibited bases,” the CFPB said. The act also prohibits mortgage lenders from making statements or engaging in activities that would discourage these applicants from applying for credit. The CFPB’s lawsuit alleges that Townstone violated the ECOA by engaging in discriminatory lending practices, and that these practices also constituted violations of the CFPA.

According to the lawsuit, between 2014 and 2017 Townstone drew almost no applications for properties in African-American neighborhoods located in the Chicago metro area, and few applications from African-American borrowers, despite receiving an average of 740 applications per year and ranking in the top 10% of lenders drawing applications from the Chicago metro area.

The bureau also alleged that Townstone executives, including CEO Barry Sturner, made comments during the company’s weekly radio shows and podcasts – through which Townstone marketed its services – that illegally discouraged African-American applicants from applying for a mortgage. The CFPB’s lawsuit cites a comment made by Sturner on an episode of the podcast that recommended driving “very fast through Markham” – a majority-African-American community. On another episode, Sturner described a Jewel grocery store in downtown Chicago by saying “We used to call it Jungle Jewel. There were people from all over the world going into that Jewel. It was packed. It was a scary place.”

The company has also been accused of engaging in redlining by discouraging applicants from applying for mortgages for properties located in African-American neighborhoods, including “by making discouraging statements during its weekly radio shows and podcasts.”

Townstone Financial, meanwhile, is accusing the CFPB – an agency run by Trump appointee Kathy Kraninger – of beating up on Townstone in order to silence conservative speech, as the company advertises and runs its radio show on a conservative AM radio station.

“The CFPB is using this case to drive all banking and mortgage companies away from advertising on conservative talk radio and to punish mainstream conservative political speech and social commentary,” said James Bopp Jr. of The Bopp Law Firm, which is representing Townstone. “The CFPB has long been controversial and just lost a case in the United States Supreme Court for being improperly structured. They have been waiting years to file a case on the eve of a presidential election to damage conservative voices.  This is another federal agency weaponized to attack conservatives that needs to be stopped.”

Chicago is one of the worst cities in America when it comes to the mortgage-approval gap between Black and white borrowers, according to a recent Redfin study. In the Chicago metro area – along with Milwaukee, Detroit, San Francisco and St. Louis – mortgage denial rates are more than 10 percentage points higher for Black borrowers than for white borrowers.