CFPB slaps Chicago mortgage lender with redlining lawsuit

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The Consumer Financial Protection Bureau has sued a Chicago-based mortgage lender alleging it engaged in illegal redlining by discouraging prospective Black applicants from applying for home loans.

The CFPB announced the complaint Wednesday against Townstone Financial, a small nonbank mortgage lender that marketed its services through an infomercial and podcast called “The Townstone Financial Show.”

The complaint alleges that from 2014 through 2017, the company’s CEO and president — not named in the lawsuit — engaged in “unlawful redlining” by making “discouraging statements” that "discouraged prospective applicants living in African-American neighborhoods in the Chicago MSA from applying to Townstone for mortgage loans."

The lawsuit raises questions about free speech and whether mortgage lenders can be held accountable for redlining based on remarks made when marketing home loans on talk radio programs.

The CFPB announced the complaint Wednesday against Townstone Financial, a small nonbank mortgage lender that marketed its services through an infomercial and podcast called “The Townstone Financial Show.”
The CFPB announced the complaint Wednesday against Townstone Financial, a small nonbank mortgage lender that marketed its services through an infomercial and podcast called “The Townstone Financial Show.”

“The co-hosts of the Townstone Financial Show made a number of statements on the show, across multiple episodes, that would discourage African-American prospective applicants from applying to Townstone for mortgage loans, would discourage prospective applicants living in African-American neighborhoods from applying to Townstone for mortgage loans, and would discourage prospective applicants living in other areas from applying to Townstone for mortgage loans for properties in African-American neighborhoods,” the CFPB said in the 19-page lawsuit.

Townstone did not immediately respond to a request for comment.

The CFPB cited a January 2017 episode of the radio show in which the company’s CEO described a Jewel-Osco grocery store in downtown Chicago as “Jungle Jewel” that was frequented by “people from all over the world” and “a scary place.”

In a June 2016 episode of the radio show, the CFPB said, Townstone’s CEO stated that the South Side of Chicago between Friday and Monday is “hoodlum weekend” and that the police are “the only ones between that turning into a real war zone and keeping it where it’s kind of at.”

During another radio broadcast, in January 2014, Townstone’s CEO responded to a question from a caller by saying that the caller’s wife is “a woman and she probably doesn’t have good credit because she’s a woman.”

The lawsuit alleges that Townstone violated the Consumer Financial Protection Act, the Equal Credit Opportunity Act and Regulation B that prohibit mortgage lenders from discriminating against applicants on the basis of race, color or national origin. The lawsuit was filed in the U.S. District Court for the Northern District of Illinois.

The CFPB said that Townstone made no effort to market directly to African Americans, who make up 30% of Chicago's population. Townstone received 2,700 loan applications during the four-year period from 2014 through 2017. But just 37, or 1.4%, came from Black applicants, the bureau said.

In a press release, the CFPB said its complaint "is not a finding or ruling that Townstone has violated the law."

The CFPB is seeking unspecified damages, redress to consumers and a civil money penalty.

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CFPB Redlining Enforcement Enforcement actions Diversity and equality City of Chicago, IL Mortgages Nonbank Race discrimination
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