Townstone Financial, Inc. and Barry Sturner
On July 15, 2020, the Bureau filed a lawsuit against Townstone Financial, Inc., a nonbank retail-mortgage creditor and broker based in Chicago, Illinois. The Bureau alleged that Townstone violated the Equal Credit Opportunity Act (ECOA); its implementing regulation, Regulation B; and the Consumer Financial Protection Act (CFPA). For years, Townstone drew almost no applications for properties in majority-African-American neighborhoods located in the Chicago-Naperville-Elgin Metropolitan Statistical Area (Chicago MSA) and few applications from African Americans throughout the Chicago MSA. The Bureau alleged that Townstone engaged in discriminatory acts or practices, including making statements during its weekly radio shows and podcasts through which it marketed its services, that discouraged prospective African-American applicants from applying for mortgage loans; discouraged prospective applicants living in African-American neighborhoods in the Chicago MSA from applying for mortgage loans; and discouraged prospective applicants living in other areas from applying for mortgage loans for properties located in African-American neighborhoods in the Chicago MSA. On November 25, 2020, the Bureau filed an amended complaint, which added as a defendant Barry Sturner, Townstone’s cofounder, sole owner, and sole director, as the fraudulent transferee of more than $2.4 million from Townstone. The defendants filed a motion to dismiss the amended complaint on February 8, 2021, which the court granted on February 3, 2023. The Bureau appealed, and, on July 11, 2024, the Seventh Circuit held that “an analysis of the text of the ECOA as a whole makes clear that the text prohibits not only outright discrimination against applicants for credit, but also the discouragement of prospective applicants for credit” and that “Regulation B’s prohibition on the discouragement of prospective applications is consistent with the plain text of the ECOA.” The court reversed the district court’s decision and remanded the case for further proceedings. On November 7, 2024, the court entered a stipulated final judgment and order against Townstone, which prohibits Townstone from engaging in any acts or practices that violate ECOA in connection with offering or providing mortgage loans. It also requires Townstone to maintain a compliance management system and policies and procedures designed to ensure and test compliance with ECOA, provide ongoing education and training for employees, and pay a $105,000 civil money penalty. On the same day, pursuant to the parties’ stipulation, the court dismissed the Bureau’s claim against Sturner.
Related documents
U.S. District Court Memorandum Opinion and Order
U.S. Court of Appeals Opinion (This version has been modified from the version that was entered by the court in order to optimize the reading experience for individuals with disabilities. No text has been changed.)
Stipulated Dismissal - Sturner (This version has been modified from the version that was submitted to or entered by the court in order to optimize the reading experience for individuals with disabilities. No text has been changed.)
Stipulated Final Judgment and Order (This version has been modified from the version that was entered by the court in order to optimize the reading experience for individuals with disabilities. No text has been changed.)
Press release
CFPB Takes Action to Address Townstone Financial’s Unlawful Redlining