On March 26, 2025, the CFPB announced that it is seeking to vacate the settlement the CFPB extracted from Townstone back in 2024 after suing the nonbank retail-mortgage creditor for discriminatory lending practices and redlining. In its press release, the CFPB stated that after a thorough review, the Bureau is seeking to “make Townstone whole by returning the six-figure penalty they were forced to pay.”
The CFPB enumerated the following reasons for overturning the case against Townstone Financial Inc.:
The investigation was not prompted by any actual or perceived harm, but by pure quota-style statistics. The CFPB's “redlining screen” identified 22,000 companies, narrowing down to a few based on vague “qualitative research.” Townstone, a small firm with fewer than 10 employees and a politically-themed radio show, became a target.
To CFPB, a disparity automatically equaled discrimination. The CFPB targeted Townstone not for discriminatory actions but for perceived racial disparities in mortgage applications. They identified a shortfall of just 31 applications from “majority-minority” areas out of 876 over three years, pushing for what resembled a mortgage quota. Despite Townstone hiring loan outreach officers for minority communities, the CFPB claimed they weren't the right type of minority.
Townstone was targeted for their protected free speech. CFPB used audio mining software to review Townstone’s radio show and podcasts, finding 16 minutes of content (0.33%) they deemed “disconcerting” and "potentially inappropriate." The concerns included discussions on local crime, political speech about freedom of speech, support for law enforcement, and advice for homebuyers.
There is no evidence of any potential customers reporting Townstone to CFPB or finding them offensive. In a survey funded by Townstone to sway the CFPB, none of the black respondents took offense at Townstone’s radio show; one even called their comments on crime “reliable and helpful.” The CFPB's assessment acknowledged that Townstone promoted programs for disadvantaged populations, noting that the “disparities” were not due to their business plan, office location, or advertising.
CFPB subjected Townstone to years of harassment.
The process was the punishment, in addition to an egregious fine. CFPB lawyers noted in an internal memo that Townstone could face penalties of $28,906 per day for four years, totaling $42,202,760, over 16 minutes of non-racial radio banter. The CFPB is now asking the court to refund the imposed penalty and dismiss the case.
Read the CFPB’s press release here.