Settlement Reached in Racial Discrimination Case Against Chicago Lender

(Reuters) – The top U.S. consumer financial watchdog agency announced a settlement in a lawsuit with a Chicago mortgage lender over alleged racial discrimination.

Settlement Details

Under the proposed agreement, Townstone Financial will pay a $105,000 fine into the U.S. Consumer Financial Protection Bureau's victims relief fund.

The Pacific Legal Foundation, representing Townstone, stated that the company neither admitted nor denied the allegations and settled due to the government's superior legal resources. Attorney Steve Simpson remarked, "This case should never have been brought."

Importance of the Settlement

The CFPB's enforcement action follows a July legal victory before the U.S. Seventh Circuit Court of Appeals, granting the agency new powers to combat racial discrimination in lending and loan marketing.

This marks the agency's second enforcement action against racial bias in the mortgage industry within three weeks.

Key Quote

CFPB Director Rohit Chopra stated, "The CFPB's lawsuit against Townstone Financial included a major appellate court victory that makes clear that people are protected from illegal redlining even before they submit their application."

Background

In 2020, the CFPB accused Townstone Financial of discouraging Black individuals from applying for mortgages and neglecting the credit needs of African American neighborhoods in Chicago. The company allegedly disparaged predominantly Black areas as crime-ridden and referred to them as the "jungle," during its weekly marketing radio shows and podcasts.