The CFPB filed a joint motion seeking to vacate the settlement it extracted from Townstone Financial, a small Midwest mortgage company with about 10 employees, after what the agency now characterizes as a seven-year "harassment saga." The Bureau is seeking to return an unspecified six-figure penalty that Townstone was forced to pay as part of the original settlement.
According to the CFPB's current leadership, the original investigation was triggered not by consumer complaints but by a "redlining screen" that flagged 22,000 companies based on statistical disparities. Townstone was allegedly targeted because it was a small firm that operated a radio show touching on political topics, making it "easy for the CFPB to bully," the agency said. The purported discrimination was based on a "shortfall" of just 31 applications from "majority-minority" areas out of 876 total applications over three years.
The Bureau claims its previous leadership used "audio mining software" to analyze Townstone's radio content, identifying 16 minutes out of nearly 79 hours that were deemed "disconcerting" for discussing local crime, political issues around freedom of speech, and supporting law enforcement. Acting Director Vought characterized this as "regulation-by-enforcement" that trampled First Amendment rights, stating the agency "abused its power, used radical 'equity' arguments to tag Townstone as racist with zero evidence."
The case appears to reflect broader tensions over the CFPB's fair lending enforcement approach under different administrations. Internal CFPB memos allegedly 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 current leadership described this as using "novel regulation-by-enforcement to trample on decades of First Amendment jurisprudence."
"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. Senior Advisor Dan Bishop added that "this was a flagrant misuse of government resources to destroy a small business that did nothing wrong."
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. The agency 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 motion to vacate represents an unusual reversal for a federal agency seeking to undo its own enforcement action. The case highlights ongoing debates over fair lending enforcement methodologies and the extent to which agencies can consider statistical disparities as evidence of discrimination without direct evidence of discriminatory intent or consumer harm.