Does CFPB enforcement action violate First Amendment?

In a motion to dismiss filing in the U.S.  District Court for the Northern District of Illinois, Eastern Division, attorneys for Townstone Financial Inc. and owner Barry Sturner contend the CFPB’s complaint improperly expands the reach of the ECOA to reach “prospective applicants;” regulates “discouraging” behavior before a “credit transaction” even exists; and creates affirmative advertising and hiring requirements, which cannot be squared with the unambiguous language of the statute.”

Also see Townstone owner shocked by CFPB action

The CFPB last year sued Townstone and Sturner for allegedly 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.

Sturner’s attorneys contend the CFPB action is an overreach.

“The bureau’s interpretation thereof runs contrary to the First Amendment of the United States Constitution because the bureau seeks to regulate the content and viewpoint of protected speech and does so in a way that is unconstitutionally overbroad and vague, both as applied to Townstone and facially,” Sturner’s attorneys stated in the motion to dismiss.

In an amended complaint filed late last year, 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 is legally irrelevant.

“The derivative claim against Townstone’s owner, Barry Sturner, should also be dismissed because that claim only becomes relevant if the bureau succeeds on its claims against Townstone, which for reasons articulated herein, it cannot,” the motion stated.

Sturner is represented by Richard Horn of Garris Horn LLP, Sean Burke of Mattingly Burke Cohen & Biederman LLP, Marx Sterbcow of The Sterbcow Law Group LLC and James Bopp Jr. of The Bopp Law Firm.