A Chicago area mortgage brokerage, which became well-known in the region thanks to years on Chicago radio, has asked a federal judge to pull the plug on a federal government agency’s attempt to sue them into bankruptcy over statements the brokerage’s executives made on the radio.
According to documents filed in the past few months, Townstone Financial and its president, Barry Sturner, have argued the federal Consumer Financial Protection Bureau targeted them with a discrimination lawsuit, to make an example of them and silence their protected, non-discriminatory speech.
“The Bureau brought this case against a small, single owner mortgage company and now seeks to bankrupt the business and its owner based on a handful of comments that amount to about five minutes over four years of programs, which the government feels discourage applications from African-Americans,” Townstone wrote in a brief filed on April 12.
Sean P. Burke
| MBCB Law
“The allegedly ‘discriminatory’ statements, however, mention crime, the police, the issue of urban food deserts, but never once mention race or actually applying or not applying for a mortgage.”
In a brief filed in February, Townstone urged the judge to “put an end to this saga,” of what it characterized as “overreach” on the part of an overzealous federal agency.
In July 2020, the CFPB filed suit in Chicago federal court against Townstone. The complaint accused Townstone of racial discrimination.
However, the CFPB complaint did not cite any particular instances in which Townstone allegedly discriminated against any real mortgage applicants. Rather, the CFPB said statements Sturner and others associated with Townstone had made in passing on Townstone’s weekly radio “infomercial,” amounted to discrimination, because they could “discourage” Black borrowers from applying for loans through Townstone.
Further, CFPB asserted Townstone didn’t employ enough Black loan officers, nor did it sufficiently target advertisements to potential Black applicants.
According to the complaint, these included:
- In January 2017, Townstone CEO Barry Sturner allegedly related his experiences shopping at “the Jewel on Division” in Chicago. He referred to that particular supermarket as “Jungle Jewel,” adding: “There were people from all over the world going into that Jewel. It was packed. It was a scary place;”
- In June 2016, Sturner, in discussing “mortgage-lending services that Townstone could provide to police officers and others” described weekends on the South Side of Chicago as “hoodlum weekend,” adding: Police are “the only ones between that turning into a real war zone and keeping it where it’s kind of at;”
- In November 2017, during a discussion of skydiving and the resulting adrenaline “rush” that follows, a Townstone executive allegedly “suggested that ‘walking through the South Side at 3 a.m. [would] get the same rush;’”
- In January 2014, in giving advice on how to get a home ready for sale, a former Townstone executive and co-hosts of the Townstone show said home sellers should “change the light fixtures, paint it from top to bottom,” and “take down the Confederate flag;” and
- In January 2014, Townstone’s former president allegedly told a caller from Markham, a suburban community with a large Black population, that “it’s crazy in Markham on weekends,” and “You drive very fast through Markham … you don’t look at anybody or lock on anybody’s eyes in Markham … You look at your dashboard, you don’t lock on anybody.”
Late last fall, the CFPB amended its complaint to include a count against Sturner, accusing him of improperly transferring $2.4 million from Townstone to himself. The CFPB asserted the transfer amounted to an attempt to shield that money from any fines or judgment the CFPB may be able to secure against Townstone.
In response, Townstone and Sturner asked a federal judge to dismiss the complaint. They said the CFPB’s interpretation of the applicable federal laws in the case are “absurd” and represent an “overreach” intended to merely silence “entire viewpoints and categories of content” the federal agents disapprove of.
They asserted federal lending laws cannot be extended to violate lenders’ First Amendment rights in the name of prohibiting “discouragement” of potential loan applicants – a category, they said, that “theoretically includes the entire world.”
“… The language used in the (Equal Credit Opportunity Act) statutory scheme makes clear that Congress intended the statute to reach conduct affecting ‘applicants,’” and does not include “any language that would extend its prohibitions to ‘prospective’, ‘potential’, or ‘possible’ applicants or anyone else who has no contact whatsoever with a creditor,” Townstone wrote in its April 12 filing.
Townstone noted the CFPB’s attempts to regulate not only its speech, but also its hiring practices and even its advertising.
In addition to a weekly radio "infomercial" program on conservative talk radio station, AM560 The Answer, Townstone has also advertised extensively on other radio stations, including WGN 720 AM and Chicago sports talk station, WSCR 670 AM, "The Score."
Townstone argued the CFPB action, if allowed to succeed, would move federal lending laws from protecting applicants against discrimination, to empowering federal regulators to impose hiring quotas on lenders and tell lenders who they should advertise to, and how to spend their marketing budget.
Further, Townstone argued the CFPB’s standards asserted in its complaint would leave lenders constantly guessing, as to when and how they might be violating the new interpretation of the law, as expressed in the complaint.
In response, the CFPB argued their case is based on a federal regulation, known as “Regulation B,” which they said was enacted under the federal rulemaking process established under the ECOA, and which carries the same weight as the law itself. That regulation empowers federal regulators to take action against lenders who engage in the act of “discouraging … applications for credit.”
Further, the CFPB said its authority under the regulation should extend to scrutinizing Townstone’s speech on the radio, and its marketing and advertising efforts, saying they “are highly relevant to the determination of Townstone’s discriminatory intent and avoidance of the credit needs of African-Americans and African-American neighborhoods, all of which support the Bureau’s claims of discouragement and intentional discrimination…”
The CFPB further asserted its regulation of Townstone’s speech is not prohibited by the Constitution, because the speech is commercial in nature and the agency’s goal of protecting prospective applicants from potential discrimination outweighs Townstone’s speech rights.
Sturner did not respond to an interview request from The Cook County Record.
Townstone and Sturner are represented in the action by attorneys Sean P. Burke and E. Brenda Kpotufe, of the firm of Mattingly Burke Cohen & Biederman LLP, of Indianapolis, and Marx Sterbcow, of the Sterbcow Law Group, of New Orleans.