As Barry Sturner tells it, he should never have had anything to worry about.
After decades in the mortgage lending business, Sturner said he was never lax about “compliance” – a business and industry term for following laws and various government regulations.
“We’ve been in business since 1998, and we’ve never had a complaint against us,” said Sturner. “Not for discrimination, or anything else. Not one.”
So Sturner said he was blindsided by what he says is an ongoing effort by federal regulators to put him out of business, and make an example of his mortgage brokerage, Townstone Financial, in a bid to expand the power of the Consumer Financial Protection Bureau to regulate the speech and conduct of people who make their living lending to home buyers.
“This has been shocking to me, and my business, and has been agonizing for my family,” said Sturner.
Four years ago, when federal regulators from the Consumer Financial Protection Bureau began knocking on the door of Chicago-based Townstone, Sturner said he – foolishly, in hindsight – didn’t bother to really consult an attorney before answering the regulators’ questions, first, by responding to a mailed “survey” and then, several months later, in person, when CFPB agents interviewed Sturner and his staff.
Even after agreeing to turn over four years of emails, and sitting for eight hours of questioning, Sturner said he had no worries. That is, until CFPB agents questioned him about a selection of “snippets” from a radio infomercial program, featuring Sturner, that Townstone Financial had sponsored for years on Chicago conservative talk radio station, AM560 The Answer.
As Sturner described it, he was puzzled by the selections, in which he merely commented on crime and other issues facing Chicago, the city in which he and his family live, work and attend public school.
“I’m not anti-government,” said Sturner. “My life has been about following the law.
“I never would have thought that talking about my own city, my neighborhood, would lead to something like this.”
In July 2020, after more than three years of investigation and discussions involving Townstone, the CFPB filed a complaint in Chicago federal court against the small brokerage.
The complaint accused Townstone of violating a federal lending rule, written as a regulation under the federal law, the Equal Credit Opportunity Act. The law itself has been on the books for decades, forbidding discrimination in lending.
However, in the decades since, the law’s text has been expanded under federal rulemaking powers, which give federal banking regulators, now centered in the CFPB, the authority to explain how the federal government will enforce the law, in many thousands of pages of federal rules and regulations.
In this case, the CFPB pointed to a rule known as Regulation B. That regulation, the CFPB said, has been interpreted to prohibit lenders from not only denying credit and loan opportunities to Black borrowers and other racial and ethnic minorities, but to also forbid “discouraging” such minority borrowers from seeking loans.
In the complaint, the CFPB accused Townstone and Sturner of violating that regulation through Townstone’s radio programs. Specifically, the CFPB said the Townstone program’s discussions of crime in Chicago and other issues amounted to “discouraging” Black residents of Chicago’s South Side and other predominantly Black Chicago area communities from applying for loans from Townstone.
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.”
The complaint does not allege any specific instances of discrimination against actual Black applicants.
In response, Townstone has asked a federal judge to dismiss the case. They argue the case represents an attempt by the CFPB to use Townstone to set an example, and frighten other lenders into censoring their otherwise-protected political and social speech to align with the beliefs of federal regulators at the CFPB.
Further, they argue the case marks an attempt by the CFPB to use the ECOA law to expand its power over virtually every aspect of a lenders’ business, including its marketing plan and budget, by asserting powers to protect even people who may never apply for a loan from any lender.
Sturner noted Townstone advertised extensively on radio stations throughout the Chicago area, including those with massive audiences, such as AM720 WGN and Chicago sports talk station, The Score 670AM WSCR.
“Our goal was simply to reach as many people as we possibly could,” said Sturner. “And we’re here waiting for the phone to ring.
“And if you call me, I’m going to try to get you a loan, I don’t care where you are.”
In court documents, the CFPB said its authority under its regulation extends to scrutinizing Townstone’s speech on the radio, and its marketing and advertising efforts. The CFPB said 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 “discouraging” potential discrimination outweighs Townstone’s speech rights.
However, Sturner said he has proof the CFPB’s claims regarding “discouragement” don’t hold up. After learning of the “snippets,” that form the crux of the CFPB’s action, Townstone commissioned consumer testing firm, the Kleimann Communication Group, to test real world reactions to the specific radio segments.
Sturner said his legal team selected Kleimann specifically because the firm had worked extensively with the CFPB and a host of other federal agencies to test Americans’ response to new federal lending rules and required mortgage disclosure forms and other lending statements presented to borrowers at the time of application and closing.
In their report, Kleimann stated their one-on-one consumer interviews with Black residents of Chicago’s South Side returned no response like those the CFPB claimed. The report indicated none of those interviewed felt offended by the statements, nor did they report feeling “discouraged” from applying for loans from Townstone.
Further, the report indicated several of those interviewed by Kleimann requested contact information for Townstone, so they could apply for loans.
“No one would bat an eye if you say on the radio that we have a problem with crime in Chicago,” said Sturner.
Sturner said his company also has responded to CFPB claims Townstone did not issue enough loans to Black borrowers. He said they commissioned a survey of loan data, comparing Townstone to other lenders their size. And the results indicated Townstone’s lending practices were in line with those of similarly-sized competitors in the Chicago region.
Sturner said, to this point, the CFPB has refused to provide Townstone with a list of the lenders the CFPB had selected for comparison, and which led the bureau to conclude Townstone had issued too few loans to Black borrowers, relative to other lenders in the Chicago area.
Sturner said he intends to continue fighting the CFPB complaint, noting it represents a threat to
“I don’t know who is pushing this, or why,” said Sturner. “If a government agency is allowed to just expand the law, and make things up as they go along, it doesn’t matter what you do, if you’re in banking or finance.
“This is a threat to everybody.”