WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) is seeking to vacate a settlement reached with Townstone Financial, a small Midwest mortgage firm, following what it describes as years of misplaced enforcement actions. Acting Director Russ Vought announced the move after a comprehensive review revealed that the CFPB’s actions against Townstone were baseless and disproportionate. The Bureau also intends to refund the six-figure monetary penalty imposed on the firm.
“CFPB abused its power, used radical ‘equity’ arguments to tag Townstone as racist with zero evidence, and spent years persecuting and extorting them – all to further the goal of mandating DEI in lending via their regulation by enforcement tactics. The more we uncover at CFPB, the more we see how this agency was weaponized against targeted Americans,” said Acting Director Vought.
The settlement with Townstone, a firm of fewer than ten employees, originated from an investigation by CFPB alleging discriminatory lending practices, or “redlining,” based on statistical disparities in mortgage applications. According to the Bureau at the time, data showed the firm’s mortgage applications from “majority-minority” areas fell short of expectations by just 31 instances out of 876 applications over three years. While the CFPB cited this as evidence of racial discrimination, critics argue such conclusions were unfounded.
From the beginning, no consumers or potential clients filed complaints or reported discriminatory behavior by Townstone to the CFPB. Instead, the firm was selected for investigation through an agency-defined “redlining screen” that relied on arbitrary statistical metrics and computer analysis. The case was further fueled by alleged biases within CFPB, which sought to implement policies aligned with diversity, equity, and inclusion (DEI) frameworks.
Townstone’s owner asserts that the enforcement against the company extended beyond mortgage statistics. CFPB reportedly analyzed hours of content from Townstone’s community-oriented radio program, flagging just 16 minutes of discussions on local crime, neighborhood culture, and broader social issues, which the Bureau described as “potentially inappropriate, incorrect, or insensitive.” These broadcasts, Acting Director Vought indicated, became a focal point for allegations of discriminatory conduct despite no evidence showing they harmed or alienated customers.
“This was a flagrant misuse of government resources to destroy a small business that did nothing wrong. For the crime of protected political speech, this firm was targeted and harassed for years by this rogue agency. We are righting this wrong and protecting the First Amendment,” said Senior Advisor Dan Bishop.
Critically, even the CFPB’s internal investigations were unable to substantiate claims of discrimination against Townstone. An independent consumer survey commissioned by the company revealed that none of the respondents took offense to Townstone’s commentary, with some finding the firm’s remarks on issues like local crime “helpful.” A CFPB assessment further acknowledged that Townstone’s market disparities could not be attributed to business practices, advertising focus, or office locations.
Townstone’s owner described the ordeal as one of unrelenting harassment, driven by an agency with “an unlimited budget and army of lawyers.” “They twisted innocuous statements about crime into something nefarious and then tried to use it to ruin my reputation and destroy my business,” he stated. Facing the threat of a staggering $42 million fine for alleged violations over four years, Townstone ultimately conceded to a settlement in the face of what many have described as the CFPB’s “regulation by enforcement” approach.
The CFPB’s decision to vacate the settlement reflects what Vought and fellow critics have described as necessary corrective action. At the heart of the matter lies a broader debate over the scope of government enforcement in the financial sector and the agency’s controversial implementation of DEI-driven policies impacting regulatory decisions.
The forthcoming court motion to nullify the settlement is expected to include a request to refund all monetary penalties previously imposed on Townstone, a move signaling accountability for prior missteps within the Bureau. For now, the CFPB’s acknowledgment of overreach marks a significant moment in the ongoing discourse over the balance of power between regulatory bodies and small businesses.
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