1.The Original Case

The CFPB’s enforcement action against Townstone dates back to 2020. The Bureau accused the mortgage lender of redlining—specifically, discouraging African American applicants in the Chicago area through statements made on podcasts and radio shows. The district court originally dismissed the case, ruling that the Equal Credit Opportunity Act (ECOA) only applies to discrimination against actual applicants. However, the Seventh Circuit reversed that decision, interpreting ECOA to also cover the discouragement of prospective applicants.

Following that appellate decision, the CFPB reached a settlement with Townstone in November 2024. It was heralded as a landmark moment—the first redlining case brought against a nonbank mortgage lender or broker. Under the settlement, Townstone agreed to pay a $105,000 civil penalty and comply with ECOA moving forward.

At the time, CFPB Director Rohit Chopra praised the resolution as a win for fair lending, stating that consumers are protected “even before they submit a mortgage application.”

2.Why the CFPB Now Wants to Reverse Course

On March 26, 2025, the CFPB and Townstone filed a joint motion under Rule 60(b)(6) to vacate the Stipulated Final Judgment and Order. The motion is based on a declaration from Dan Bishop, Senior Advisor to Acting Director Russell Vought, which levels serious allegations at the Bureau’s own conduct.

Key claims include:

♦ Targeting for Political Reasons: Internal CFPB communications reportedly show that Townstone was flagged due to public political statements by its owner, Barry Sturner, including support for law enforcement and criticisms of crime in local neighborhoods.

♦ Flawed Enforcement Strategy: Bishop’s declaration states that the case stemmed from a “redlining screen” that pulled in over 22,000 entities, with Townstone chosen in part because it was small and “easy to bully.”

♦ First Amendment Concerns: The Bureau allegedly relied on audio analysis of Townstone’s podcasts and radio content to extract a few “inappropriate” comments, raising serious questions about freedom of speech and viewpoint discrimination.

♦ Regulation by Enforcement: The motion argues that CFPB lawyers pursued the case in part to advance diversity, equity, and inclusion (DEI) objectives—without strong legal justification or evidence of actual discriminatory lending practices.

In a striking statement, the CFPB’s own press release now frames the original case as a misuse of enforcement authority, quoting: “What was so disconcerting [about Sturner’s public statements]? Talking about local crime, political issues around freedom of speech, supporting local law enforcement, and telling people to check out a neighborhood before buying a home.”

3.What This Means for the Industry

It’s not every day that a federal agency seeks to undo its own enforcement settlement—and especially not in a high-profile fair lending case. This move may encourage other lenders who entered into consent orders under prior CFPB leadership to revisit their options. While Townstone may represent a unique set of facts, the case suggests a willingness by the current CFPB leadership to reassess how investigations were conducted and whether constitutional protections were respected.

It also raises a larger question: Will we see more of these reversals? And how might this impact the CFPB’s credibility and approach to future enforcement?

4.Bottom Line

This case is more than just an internal correction—it’s a signal that the Bureau may be reevaluating how it balances aggressive enforcement with legal due process. Mortgage professionals should pay close attention to this case and consider whether their own past interactions with the Bureau were handled appropriately. For now, the Townstone motion serves as a reminder that even settled cases may not always be final—especially when politics, precedent, and procedure collide.