The owner of a small Chicago mortgage company accused of violating the Equal Credit Opportunity Act (ECOA) and redlining has succeeded in his battle with the Consumer Financial Protection Bureau (CFPB). After years of discovery and back-and-forth motions, the CFPB’s case against Barry Sturner, owner of Townstone Financial, and his mortgage company was dismissed with prejudice.
“I am gratified that the court understood that CFPB’s complaint against Townstone Financial was legally baseless,” Sturner said. “Townstone does not discriminate, and no one has ever complained about anything Townstone said on its radio show. Unfortunately, we had to spend years fighting CFPB over a case that should never have been brought. Hopefully, the court’s decision will prevent others from having to endure what we have.”
In 2019, the bureau accused Townstone and Sturner of making statements during weekly radio shows and podcasts and other marketing ventures that illegally discouraged prospective African American applicants from applying to the company for mortgage loans
“This case should never have been brought, as the CFPB didn’t have the authority to do so,” Rich Horn, co-managing partner at Garris Horn and part of Townstone’s legal team, told October Research. “The court’s agreement with our reasoning has a greater impact than just this case. This reasoning is not just applicable to ECOA, but to other statutes that the CFPB has general rulemaking authority under as well.”
Sturner argued the CFPB’s complaint improperly expanded the reach of ECOA to “prospective applicants;” attempted to regulate “discouraging” behavior before a “credit transaction” even existed; and created affirmative advertising and hiring requirements, which cannot be squared with the unambiguous language of the statute.
According to the CFPB, Townstone disparaged majority-African-American neighborhoods as “hoodlum weekend” and approaching “a real war zone” or as “crazy” and places “to be driven through quickly” while avoiding eye contact; referred to a place with “people from all over the world” as a “jungle” and “scary;” and disparaged the women of a predominantly African-American area in Chicago.
“The court’s decision today is a ringing endorsement for the separation of powers,” Steve Simpson, senior attorney at the Pacific Legal Foundation, and part of Townstone’s counsel, said. “Congress makes the law; agencies enforce the law. No agency, including CFPB, has the authority to rewrite a law prohibiting discrimination against credit applicants into one that attempts to prohibit non-discriminatory conduct and speech. That’s what the CFPB did with ECOA in this case, and it’s really gratifying to see a court rebuff that effort.”
Sturner, during a 2020 interview, suggested the CFPB’s action was politically motivated.
"Following the law has always been important to me,” Sturner told RESPA News. “And then all of a sudden, they’re making these things up. I don’t know where it says that you can’t talk about current events and I can’t talk about the fact that I live in the south loop of Chicago and there’s a lot of crime around here.”
In an amended complaint, the CFPB alleged Townstone fraudulently transferred more than $2 million dollars from company accounts into Sturner’s accounts. The bureau accused Townstone and Sturner of engaging in the transfer with “actual intent to hinder, delay or defraud the bureau.” Sturner’s attorneys said the CFPB’s allegation Townstone fraudulently transferred money to Sturner was legally irrelevant since he hadn’t been convicted of any crime.
Marx Sterbcow, managing attorney of The Sterbcow Law Group, LLC, and counsel for Townstone and Sturner told October Research he hoped Congress would address what happened in this case.
“This was a David versus Goliath case where you had a government that was doing everything in their power to quash a small company in order to make some theories into law,” he said. “The case deserves some Congressional hearings about governmental abuse, because, if there was ever a case, this is the case the government needs to look at.
“It’s terrific that Barry and Townstone won this case, but where do they get their reputation back? It would be a travesty if the House or Senate did not have a hearing.”
In addition to Horn, Simpson and Sterbcow, Sturner and Townstone were represented by Sean Burke of Mattingly Burke Cohen & Biederman LLP, and James Bopp Jr. of The Bopp Law Firm.
Please visit October Research LLC’s other publications for reactions from key industry players. You can also visit the story links below for a comprehensive look back on the history on this case.
For past coverage on this case from The Title Report, see the following:
CFPB: First Amendment does not protect discrimination
Does CFPB enforcement action violate First Amendment?
Townstone owner accused of fraudulent money transfers
Townstone owner ‘shocked’ by CFPB action
Townstone responds to CFPB lawsuit
A year later, CFPB cites Townstone for ECOA violations
Mortgage company owner confirms identity in CFPB investigation
CFPB on verge of industry-changing lawsuit
For a more in-depth look at the case, see our coverage in RESPA News:
Discovery motions continue in CFPB v. Townstone suit
CFPB, Townstone file responses to parties’ motions to compel
Townstone seeking industry help to fight CFPB