CFPB Issues Order Against Townstone Financial for Redlining

On November 1, 2024, the CFPB filed a proposed order to resolve its case against Townstone Financial for discriminatory lending practices and redlining African American neighborhoods in Chicago. The proposed order would prohibit Townstone from taking any actions that violate the Equal Credit Opportunity Act (ECOA) and require the company to pay a $105,000 penalty to the CFPB’s victims relief fund. 

Townstone was a nonbank retail-mortgage creditor and broker based in Chicago. Townstone ceased mortgage lending in 2018 during the CFPB’s investigation where the Bureau found redlining practices. Between 2014 and 2017, Townstone Financial received very few mortgage applications from majority African American neighborhoods in the Chicago area, despite these neighborhoods comprising a significant portion of the region. Only about 2% of Townstone’s applications were for properties in these areas, even though they made up nearly 19% of the region’s census tracts. Additionally, more than half of the applications from these neighborhoods were submitted by white applicants.

In 2020, the CFPB sued Townstone for discouraging African Americans from applying for credit through discriminatory advertising and business practices that targeted African American neighborhoods in the Chicago area. In 2024, the United States Court of Appeals for the Seventh Circuit issued a decision that stated that the ECOA prohibits lenders from discouraging prospective applicants on a prohibited basis from applying for loans.

If entered by the court, the proposed order would require Townstone to pay a $105,000 penalty, which will be deposited into the CFPB’s victims relief fund. If Townstone violates the Equal Credit Opportunity Act again, it could find itself in contempt of the court order and face further sanctions.

Read the CFPB’s press release here.

The proposed order can be found here.

NFIP Issues Final Rule That Provides Insurance Installment Payment Plan

CFPB Fines VyStar Credit Union for Blocking Consumer Access to Accounts