You might think that, given that the government is supposed to stop and prosecute crimes, it would be glad that businesses and the citizens running them are anti-crime. Not so, apparently. Instead, the Consumer Financial Protection Bureau (CFPB) decided in 2020 to prosecute a Chicago-area mortgage lender for daring to make a couple “innocuous” statements about crime on its radio show.
Those comments were made in the context of encouraging people to invest in real estate. Naturally, crime would be a consideration in such a decision, particularly in crime-ridden Chicago. But the CFPB was looking for a company to crucify so it went after Townstone with its full might. The Hill, reporting on the CFPB’s vicious persecution of the mortgage lender, Townstone, said (emphasis ours):
In 2020, following a three-year investigation, the CFPB sued Townstone for allegedly violating the Equal Credit Opportunity Act (ECOA), which prohibits discrimination against credit applicants on the basis of prohibited characteristics, including race. To Townstone’s surprise, the CFPB accused the company of racial redlining — of refusing to lend to African Americans.
But Townstone never discriminated against any applicants for credit — and the CFPB didn’t allege it had. Instead, the CFPB claimed Townstone violated an agency regulation, known as Regulation B, that bars creditors from making statements that “would discourage … prospective applicants” from seeking credit.
Although Townstone never received complaints about its radio show, the CFPB plucked five innocuous statements about crime and life in Chicago out of hundreds of hours of radio broadcasts to allege that Townstone intended to discourage African Americans from seeking credit. Never mind that Townstone made loans to African Americans and in majority-minority census tracts, it wasn’t as successful in drawing applicants as some banks and larger mortgage companies. The CFPB alleged that this lack of success constituted evidence of redlining, even though there were no legal requirements for Townstone to reach parity with its competitors.
So the company did its best to drum up applicants with an innocuous radio show about Chicago and broke no rules. But the CFBP decided to persecute it via prosecution anyway and, to find and excuse for doing so, scanned hundreds of hours of its radio broadcasts to find five statements that weren’t even controversial, much less indicative of discrimination.
Townstone was offered the option of surrender. It could have paid the fine, not commented on the crime again, admitted it acted wrongly, and moved on. But it didn’t. Instead, Townstone took the path few do and decided to stand up to government tyranny and overreach. That decision was particularly courageous given that it meant Townstone would be openly accused of “redlining,” one of the worst charges those in the industry can face.
But Townstone wasn’t dissuaded by that. It fought back anyway. Thus began a three year legal saga that it eventually won, with a federal judge dismissing the CFPB’s case on February 3rd. The court, in dismissing the case, found that the ECOA does not even prohibit the discouragement of prospective credit applicants. Rather, it prohibits discrimination against those credit applicants.
Townstone was not even accused of doing that, so the CFBP had exceeded its statutory authority and the case was thrown out. That result, won because of the courage of one company and those running it, is a victory for not just Townstone but for all those in the mortgage industry who might find themselves targeted by the woke government. The Hill, commenting on the case’s significance, said:
The district court’s decision represents a significant win for the separation of powers. Under the U.S. Constitution, Congress makes the law — not administrative agencies. The judiciary must interpret the laws and guard against one branch encroaching on the constitutional role of another branch.
When agencies staffed by unelected officials can make law, they can turn a law banning discrimination into one that requires creditors to lend and make other business decisions based on race. Whether an agency tries to rewrite the law through regulations or litigation, it subverts the rule of law and our Constitution.
The CFPB’s interpretation of Regulation B turned the ECOA on its head. While Congress passed the ECOA to prevent discrimination against a protected class, the CFPB alleged Townstone violated the law by speaking about public issues protected by the First Amendment and failing to meet an unknown racial quota. In short, it’s no longer enough not to discriminate — the CFPB wanted to require creditors such as Townstone to lend money based on race.
Townstone suffered reputational harm from the CFPB’s accusations of racism and redlining and had to fight against CFBP for three long years. That was cost of fighting back rather than tamely bending the knee. But, in fighting back, it won a victory against the woke admin
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