CFPB Asks Court to Vacate Its Own Settlement With Mortgage Company, Citing Political Targeting

The CFPB filed a joint motion seeking to reverse the settlement and return a six-figure penalty Townstone paid as part of the deal, according to the agency. The Bureau's current leadership characterized the original enforcement action as a seven-year "harassment saga" against the company, which has about 10 employees.

The original investigation was triggered not by consumer complaints but by a "redlining screen" that flagged 22,000 companies based on statistical disparities, according to the CFPB's current leadership. The agency alleges Townstone was targeted because it was a small firm that operated a radio show touching on political topics.

The current leadership characterized the underlying discrimination allegations as based on a "shortfall" of 31 applications from "majority-minority" areas out of 876 total applications over three years.

The Bureau alleges its prior leadership used "audio mining software" to analyze Townstone's radio content, identifying 16 minutes out of nearly 79 hours that were deemed "disconcerting" for what the current leadership characterized as discussing local crime, political issues around freedom of speech, and supporting law enforcement. Vought characterized the practice as "regulation-by-enforcement" that he alleges violated First Amendment rights.

"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," said Acting Director Russ Vought.

According to the current CFPB leadership, internal memos showed the agency could have penalized Townstone up to $28,906 per day for four years, totaling over $42 million for alleged civil rights violations. The agency also cited a survey of black respondents conducted for Townstone that found no one took offense to the radio content, with one respondent calling Townstone's crime-related comments "reliable and helpful."

The CFPB filed supporting documents including a Rule 60(b) motion for relief from judgment and a memorandum in support of vacating the stipulated final judgment. Federal agencies rarely seek to undo their own prior enforcement actions.

This article is based on a CFPB press release. Townstone Financial could not immediately be reached for comment.