Judge rules out reversal of mortgage discrimination settlement, citing rule of law concerns
A federal district court has rejected the Consumer Financial Protection Bureau’s (CFPB) attempt to reverse its own settlement with Chicago-based mortgage lender Townstone Financial and its CEO Barry Sturner.
The dispute stems from a redlining case was initially brought by the CFPB in July 2020, which alleged that comments made by Townstone on its radio show discouraged African-American borrowers in the Chicago area from applying for mortgages. The basis for the claim was a Regulation B provision under the Equal Credit Opportunity Act (ECOA) prohibiting discouraging statements to prospective applicants.
In November 2024, the CFPB and Townstone reached a settlement. The agreement required Townstone to pay a $105,000 civil penalty to the CFPB’s victims relief fund and prohibited the company from engaging in conduct that violates the ECOA.
However, in March 2025, following a leadership change at the CFPB under the second Trump administration, both parties filed a joint motion to vacate the settlement. They argued that the consent order should be withdrawn, with the CFPB admitting it no longer believed the case had a legal or factual basis. The motion claimed the lawsuit was flawed and motivated by a previous administration’s overreach.
Read more: CFPB pursues penalty against Townstone for alleged mortgage redlining
The district court rejected that argument, emphasizing the voluntary nature of the original settlement and the public interest in maintaining the finality of judgments. The court noted that the lawsuit itself was initiated during President Trump’s first term and not under different political leadership, undermining claims of policy inconsistency.
“Presumably, CFPB launched the lawsuit after it determined that there was a legal and factual basis for the suit,” the court wrote. “Apparently, that was not the case. Now, current CFPB leadership under the second Trump administration, in an act of legal hara-kiri that would make a samurai blush, falls on the proverbial sword and attests that the lawsuit lacked a legal or factual basis.”
The ruling stressed that Federal Rule of Civil Procedure 60(b)(6), which allows relief from a judgment for “any other reason that justifies relief,” sets a high bar. “Rule 60(b)(6) is reserved for cases that present extraordinary circumstances,” the court said, and noted that the parties had not met that standard.
Ultimately, the court declined to “open a Pandora’s box” by allowing new administrations to revisit finalized settlements based on political or policy shifts.
The motion to vacate drew opposition from 14 nonprofit fair housing and consumer protection groups, which filed an amicus brief urging the court to preserve the settlement.
The CFPB’s attempt to reverse the settlement was widely criticized by housing advocates but supported by current agency leadership. Acting CFPB Director Russ Vought said the original case was a “flagrant misuse of government resources” and called the agency’s prior conduct “persecution” of a small business for its political views.
CFPB senior advisor Dan Bishop echoed this sentiment, alleging that the bureau had “targeted and harassed” Townstone “for the crime of protected political speech.”
Despite those claims, neither the district court nor the appeals court addressed the First Amendment issues raised by Townstone, focusing instead on the statutory interpretation of the ECOA.
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