CFPB Seeks to Vacate Abusive, Unjust Case Against Townstone

Key dates

2020-07-15

The CFPB filed its enforcement action against Townstone Financial and Barry Sturner alleging unlawful redlining-related conduct.

2024-11-07

The Northern District of Illinois entered the stipulated final judgment and order, including a $105,000 civil money penalty and restrictions concerning Equal Credit Opportunity Act compliance.

2025-03-26

The CFPB and Townstone jointly filed a Rule 60(b)(6) motion seeking relief from and vacatur of the stipulated final judgment and order.

2025-03-28

The CFPB publicly announced its request to vacate the Townstone judgment, dismiss the case, and return the penalty.

2025-06-12

The Northern District of Illinois denied the joint motion, finding that the parties had not shown the extraordinary circumstances required for Rule 60(b)(6) relief; the judgment therefore remained in effect.

Suggested considerations

• Compliance teams at mortgage lenders may wish to treat the Townstone stipulated final judgment entered on November 7, 2024 as remaining operative unless and until a court orders otherwise; the June 12, 2025 denial means the announced vacatur did not change the firm's obligations.
• Firms may wish to continue monitoring fair-lending risk using application, approval, origination, pricing, geography, marketing, and servicing data, while documenting legitimate business explanations for geographic or demographic disparities.
• Mortgage lenders and brokers may wish to review marketing, community outreach, loan-officer activity, branch and office locations, underwriting practices, and public-facing statements for potential discouragement or differential treatment under the Equal Credit Opportunity Act and Regulation B.
• Firms with CFPB consent orders may wish to avoid assuming that a change in CFPB leadership or enforcement priorities permits unilateral suspension, modification, or refund of settlement obligations; any such relief generally requires the relevant court or other legally authorized process.
• Legal and compliance teams may wish to preserve records supporting fair-lending analyses and governance decisions, including data definitions, screening methodology, model limitations, qualitative review, escalation decisions, and communications concerning public statements or marketing content.
• Industry participants may wish to distinguish the CFPB's litigation position in Townstone from a binding change to redlining standards: the publication did not repeal, amend, or narrow the Equal Credit Opportunity Act, Regulation B, the Fair Housing Act, or applicable supervisory expectations.

What changed

The CFPB publication announced a proposed litigation step, not a new regulation, supervisory requirement, or generally applicable enforcement policy. The joint motion alleged that the prior redlining investigation and settlement were materially flawed, including alleged reliance on mortgage application and origination disparities, analysis of Townstone's public statements, and infringement of First Amendment rights. The motion sought to vacate the stipulated final judgment and order, dismiss the case, and return the $105,000 penalty. The court ultimately rejected that request, so no release from Townstone's obligations or refund resulted. Independent commentary characterized the motion as unusual and unprecedented and warned that vacating a consent judgment merely because agency leadership

Who is affected

• Townstone Financial, Inc., a nonbank mortgage lender and broker
• Mortgage lenders and mortgage brokers subject to CFPB fair-lending supervision or enforcement
• Mortgage lenders and brokers with consent orders, stipulated judgments, or other CFPB settlements
• Consumers and fair-housing organizations monitoring redlining and Equal Credit Opportunity Act enforcement

Related regulations

• Equal Credit Opportunity Act
• Regulation B, 12 C.F.R. Part 1002
• Fair Housing Act, 42 U.S.C. §§ 3601-3619
• Federal Rule of Civil Procedure 60(b)(6)