CFPB Watch: Flagrant redlining, fake foreclosures, and stimulus funds

The Consumer Financial Protection Bureau (CFPB) is suing non-bank mortgage lender Townstone Financial Inc. for redlining. The Bureau has accused Chicago-based Townstone of discouraging applicants from Black neighborhoods from applying for a mortgage, and of discouraging potential homeowners from applying for home loans in predominantly Black neighborhoods.

The suit represents the CFPB’s first fair lending case under the Equal Credit Opportunity Act (ECOA) since CFPB Director Kathy Kraninger took charge of the Bureau in 2018.

In its complaint, the CFPB accuses Townstone of repeatedly making insulting remarks about Black people and Black neighborhoods on its weekly radio shows and podcasts, seemingly in order to dissuade them from turning to the lender for mortgages. The Bureau alleges that Townstone “engaged in unlawful redlining” and other practices “that would discourage prospective applicants, on the basis of race, from applying for credit in the Chicago” metropolitan area. Despite over 90% of its mortgage lending being in the Chicago area—and close to 20% of Chicago’s neighborhoods being predominantly Black—Townstone “drew about 2,700 applications, of which only 37 (1.4%) came from African-Americans in the Chicago” area from 2014 and 2017.

The Bureau is seeking to prevent future possible redlining by Townstone, as well as to obtain penalties for the discrimination and harm it found, and to receive some recourse for consumers.