CFPB Seeks to Vacate Abusive, Unjust Case Against Townstone

WASHINGTON, D.C. – Today, the Acting Director of the Consumer Financial Protection Bureau (CFPB) Russ Vought is seeking to vacate the settlement the CFPB extracted from Townstone after a seven-year harassment saga. Using a “redlining screen” based on an arbitrary number of mortgages, CFPB set out to destroy a small Midwest firm with about ten employees and a radio program called Townstone Financial. After a thorough review, the CFPB is seeking to make Townstone whole by returning the six-figure penalty they were forced to pay.

“CFPB abused its power, used radical ‘equity’ arguments to tag Townstone as racist with zero evidence, and spent years persecuting and extorting them – all to further the goal of mandating DEI in lending via their regulation by enforcement tactics. The more we uncover at CFPB, the more we see how this agency was weaponized against targeted Americans,” said Acting Director Russ Vought.

“This was a flagrant misuse of government resources to destroy a small business that did nothing wrong. For the crime of protected political speech, this firm was targeted and harassed for years by this rogue agency. We are righting this wrong and protecting the First Amendment,” said Senior Advisor Dan Bishop.

Background

The investigation was not prompted by any actual or perceived harm, but by pure quota-style statistics. CFPB ran a “redlining screen” that caught 22,000 companies and then winnowed it down to a handful with unexplained “qualitative research.” Townstone was targeted because it was a small firm (<10 employees) and had a radio show that touched on political topics, making it easy for the CFPB to bully. To reiterate, no one came forward to complain about Townstone, they were “drawn out of hat” by a computer model run by DEI-driven CFPB bureaucrats.

To CFPB, a disparity automatically equaled discrimination. CFPB targeted Townstone not based on any act of discriminatory conduct, but solely on perceived racial disparities in mortgage application and origination statistics. That disparity? An agency-defined “shortfall” of just 31 applications from “majority-minority” areas, out of 876 total applications in a three-year period. CFPB wanted a de-facto mortgage quota, a policy aligned with the views of radical DEI proponents like Robin DiAngelo and Ibram X Kendi. Townstone had even hired loan outreach officers to go to minority communities, but this did not satisfy the CFPB, who claimed they weren’t the right type of minority. In 2022, CFPB Director Rohit Chopra said “racial equity,” was a “cross-cutting priority,” and Townstone was internally tagged as a target important for that priority.

Townstone was targeted for their protected free speech. CFPB used an audio mining software to search Townstone’s radio show and podcasts finding that they engaged in political speech critical of the Bureau. They identified 16 minutes out of nearly 79 hours of radio content (.33%) that they deemed “disconcerting” and that “could be interpreted as inappropriate, incorrect, or insensitive.” What was so disconcerting? 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. CFPB used novel regulation-by-enforcement to trample on decades of First Amendment jurisprudence.

There is no evidence of any potential customers reporting Townstone to CFPB or finding them offensive. In a survey of black respondents conducted by a consumer testing firm paid for by Townstone to persuade CFPB to break off its unrelenting attack, not one person took offense to Townstone’s radio show. One respondent even said that Townstone’s comments on crime were “reliable and helpful.” CFPB’s own assessment found that Townstone encouraged programs to help disadvantaged populations and recognized that the “disparities” weren’t explained by any business plan, office location, or targeted advertising.

CFPB subjected Townstone to years of harassment. "They twisted innocuous statements about crime into something nefarious and then tried to use it to ruin my reputation and destroy my business," Townstone’s owner told the Washington Free Beacon. "When a federal agency with an unlimited budget and army of lawyers comes after your business and smears you as a racist, you're forced to give in and take it or choose an uphill fight."

The process was the punishment, in addition to an egregious fine. CFPB lawyers wrote in an internal memo that Townstone could be penalized $28,906 per day for four years, a total of $42,202,760 for alleged violations of civil rights law. All for 16 minutes of radio banter that were not racial in nature. CFPB now seeks to right this wrong and is asking the court to refund the monetary penalty that the Bureau imposed on Townstone and to dismiss the case.