U.S. District Judge Franklin Valderrama has denied a request by the Consumer Financial Protection Bureau (CFPB) to vacate a settlement against Townstone Financial, a mortgage finance firm based in Chicago. The CFPB had accused Townstone of redlining and discrimination due to comments made by its associates about neighborhood crime on the firm’s radio show and podcast. This case has raised concerns regarding First Amendment rights and alleged political targeting.
John Berlau, Director of Finance Policy at the Competitive Enterprise Institute (CEI), expressed support for the CFPB’s attempt to overturn the lawsuit. He stated, “The CFPB under the leadership of Acting Director Russ Vought is correct and should be commended for seeking to vacate the lawsuit against the small mortgage finance firm Townstone Financial and return the unjust penalty of $105,000 that the CFPB had levied against the company.” Berlau criticized Judge Valderrama’s ruling as “unfortunate and flawed,” suggesting that previous administrations withheld information from Townstone during litigation.
Berlau argued that Townstone was charged with violating anti-discrimination laws merely for discussing crime in Chicago neighborhoods on its radio show and podcast. He noted that these discussions were similar to concerns expressed by Chicago’s progressive mayor, Brandon Johnson. Berlau warned that this enforcement action could set a precedent limiting First Amendment activities if financial professionals’ opinions are subjected to punishment by regulatory bodies.
Stone Washington, a CEI Research Fellow, also commented on Judge Valderrama’s decision, calling it disappointing. Washington claimed that political motivations influenced both the initial targeting of Townstone CEO Barry Sturner and associates by the CFPB and Judge Valderrama’s belief regarding political motivation behind vacating the settlement. Washington stated, “Using a sophisticated algorithm, the CFPB cherry-picked 16 minutes of Sturner’s 79 hours of radio content,” arguing that Sturner’s comments reflected valid concerns about local crime.
Washington emphasized that Judge Valderrama underestimated the impact of the penalties imposed on Townstone, which he believes led to its closure. He asserted that Townstone met the criteria for vacatur due to extraordinary circumstances and urged an immediate appeal from the CFPB.