A group of left-wing activist groups have moved to block the Trump administration from refunding more than $100,000 in penalties paid by Chicago area mortgage broker Townstone Financial, saying the administration lacks the authority under the law to undo a deal that ended a regulatory action intended to punish Townstone for comments the brokerage's executives made on the radio - even though federal officials now say that action was the result of unconstitutional targeting over disfavored speech.
In response, attorneys for the federal Consumer Financial Protection Bureau and for Townstone say it is the activists who have no legal leg to stand on, as the "extraordinary" nature of their joint request to terminate the deal is based on the "extraordinary circumstances" and "serious legal and constitutional problems" in the case against Townstone.
"It should go without saying that executive agencies must ensure that they have solid legal grounds to pursue potentially crushing investigations and lawsuits against private parties," the CFPB and Townstone lawyers wrote in a joint brief filed in Chicago federal court on April 15.
"It does go without saying that agencies have an obligation to follow the First Amendment, that doing so is always in the public interest, and that no agency is entitled to target individuals based on their views simply because the agency might be able to get away with it through attrition."
The filings come about two weeks after the CFPB and Townstone announced their intention to reverse the settlement that had been reached in the waning days of the administration of former President Joe Biden.
In the motion, the CFPB said the request came in response to a directive issued by President Donald Trump for the agency to review past regulatory actions for improper political motivations.
The CFPB said their review of the action against Townstone revealed regulators had "targeted" Townstone "because of its protected speech."
The CFPB and Townstone had reached a deal last fall, just before the presidential election, appearing to end the years-long court fight rife with potential ramifications for the ability of federal officials to use financial and banking regulations to regulate lenders' speech.
The CFPB had launched the action against Townstone four years earlier, in the final days of the first administration of President Trump. In the action filed in federal court, the CFPB had accused Townstone officials, including its president, Barry Sturner, of effectively discriminating against black borrowers through comments Sturner and other company executives had made several years earlier on Townstone-created radio infomercials.
The CFPB never accused Townstone of allegedly actually discriminatng against any potential borrowers on the basis of race or any other factor.
Instead, the CFPB asserted the comments, made in passing by Sturner and others on the radio, could "discourage" black borrowers from applying for loans through Townstone.
The CFPB further accused Townstone of not employing enough black loan officers and of not sufficiently advertising its products and services to potential black borrowers.
According to court documents, the alleged discriminatory statements 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.”
Sturner and Townstone, with their attorneys from the nonprofit constitutional legal advocacy organization, the Pacific Legal Foundation, had contested the CFPB's action, accusing the agency of an "absurd" and unconstitutional interpretation of the ECOA law. They said the CFPB was not trying to use the action to remedy any actual discrimination, but instead sought to use the law to silence speech federal agents find objectionable.
According to court documents, Sturner and Townstone had sought throughout the case to gain access to documents and other records from the CFPB which could provide insight into why the agency selected Townstone for the enforcement action.
Those requests were either denied or stonewalled, ultimately leading the defendants to agree to settle, rather than continue to attempt to fight the action and potentially face a more costly conclusion after exhausting even more time and money defending against the case and the CFPB's relatively limitless resources.
Under the settlement, Sturner and Townstone agreed to pay a $105,000 fine and to submit to diversity and anti-discrimination "education" for its executives and staff.
The decision to settle was reinforced by a ruling from the U.S. Seventh Circuit Court of Appeals, which had ruled the anti-discrimination language in federal law cited by the CFPB should extend not only to actual mortgage applicants, but "prospective applicants," as well. The court said the CFPB should have the authority to regulate lenders' speech, should it be perceived to discourage black home buyers from applying for mortgages.
However, after Trump took office for the second time in January 2025, the president directed the CFPB and other federal agencies to take a second look at cases, to "correct past misconduct by the Federal Government related to censorship of [constitutionally] protected speech."
In late March, the CFPB said that review revealed the CFPB had launched the action against Townstone and Sturner out of a desire to punish and make an example of the lenders "based on (their) expressed political views," particularly in the wake of racial unrest and rioting following the death of George Floyd in May 2020.
They asked U.S. District Judge Franklin U. Valderrama to allow them to vacate the settlement refund Townstone's money.
Before the judge could rule on that motion, however, a collection of progressive activist groups sought to intervene in the matter and force the government to keep the settlement in place.
That intervention was supported by a list of 14 groups, including: the National Fair Housing Alliance; Public Citizen; the American Civil Liberties Union; Better Markets; Chicago Lawyers' Committee for Civil Rights; Consumer Federation of America; Fair Housing Center of Central Indiana; HOPE Fair Housing Center; Metropolitan Milwaukee Fair Housing Council; National Association of Consumer Advocates; National Consumer Law Center; Open Communities; and South Suburban Housing Center.
In their filing, the groups asserted the CFPB lacks the legal authority to retract the settlement now, simply because "new agency leadership (are) looking to separate themselves ideologically from the political leadership of the prior administration..."
They argued the reversal would set a precedent under which companies and other targets of regulatory enforcement actions could petition new presidential administrations "every four or eight years" to renegotiate or vacate settlements of past investigations and prosecutions "to secure a better deal - or escape the previously negotiated deal entirely - based merely on the inauguration of a new president and appointment of new agency leadership."
They argued this would "bog down" courts and agencies alike "taking resources away from serving the mission of each agency and meeting the needs of the American people.
The groups also argued this could result in the possibility of actions to "claw back" payments made to "third parties" as part of those settlements, or so-called "consent decrees." Such "third parties" could include nonprofit activist organizations, such as those seeking to intervene against Townstone.
In response, the CFPB and Townstone asserted the groups' concerns are baseless.
The groups "present no reason to second-guess" the CFPB's determination "that the case against Townstone lacked any evidentiary and legal foundation and was pursued because the government disagreed with Townstone's views."
"Instead, they attack a strawman, reducing the entire motion to a 'mere change in leadership,' and positing a parade of horribles that have nothing to do with this case," the CFPB and Townstone's lawyers wrote.
The CFPB agreed the vacating of the settlement could break new legal ground. But they said that is justified in a case in which the government intentionally targeted a private business and individuals for punishment, allegedly based on their First Amendment speech.
"The desire for finality in judgments should not prevent this Court from vacting a judgment when the government is admitting to institutional failures that led to a violation of constitutional rights and there is no impact on precedent or judicial resources," the CFPB and Townstone wrote. "As to the public interest - it would only be vindicated by a grant of this joint motion" to vacate.
"Simply put, CFPB targeted Townstone because agency attorneys believed its CEO and itsemployees had engaged in wrong-think. The Bureau had no evidence of actual discrimination or even complaints by any consumers, and in fact, Townstone both hired minority loan officers and engaged in outreach to minority communities. Yet, a federal agency dragged a legitimate business through a seven-year ordeal because agency personnel didn’t like what the owner and employees said," the CFPB and Townstone said.
Judge Valderrama has not yet ruled on the motion to vacate.
He granted the request of the activist groups to file their brief in opposition to the motion to vacate, and indicated he would take the activists' arguments into account when rendering his decision.
The activists are represented by Joshua Karsh, of Mehri & Skalet, of Evanston; and Karla Gilbride, of Public Citizen Litigation Group, of Washington, D.C.
Townstone and Sturner are represented by attorneys Steven M. Simpson, Ashley Torkelson Levine and Oliver J. Dunford, of the Pacific Legal Foundation, of Arlington, Virginia, and Palm Beach Gardens, Florida; Sean P. Burke, of Mattingly Burke Cohen & Biederman, of Indianapolis; and attorney Marx David Sterbcow, of New Orleans.