Redlining Violations Include Discouragement and Low Application Volume

Redlining Violations Include Discouragement and Low Application Volume

On July 15th, the Consumer Financial Protection Bureau (CFPB) filed suit against Townstone Financial, Inc. for violations of the Equal Credit Opportunity Act (ECOA), Regulation B, and the Consumer Financial Protection Act (CFPA).

This case is interesting for several reasons, not the least of which are that –

  • The CFPB suggests that the violations noted in the complaint ended more than 2.5 years ago; and
  • In addition to the standard Redlining allegations based on low application volume in minority (here African-American neighborhoods), the CFPB alleges that Townstone used its weekly radio show and its podcasts to discourage prospective African-American applicants from applying to Townstone.

More specifically, the complaint alleges that:

  • “Townstone engaged in acts or practices, including making statements during its weekly radio shows and podcasts through which it marketed its services, that illegally discouraged prospective African-American applicants from applying to Townstone for mortgage loans;
  • “Townstone engaged in illegal redlining by engaging in acts or practices that discouraged prospective applicants living in African-American neighborhoods in the Chicago MSA from applying to Townstone for mortgage loans, including by making discouraging statements during its weekly radio shows and podcasts through which it marketed its services; and
  • “Townstone engaged in illegal redlining by engaging in acts or practices that discouraged prospective applicants living in other areas from applying to Townstone for mortgage loans for properties located in African-American neighborhoods in the Chicago MSA, including by making discouraging statements during its weekly radio shows and podcasts through which it marketed its services.

The Bureau’s complaint seeks an injunction against Townstone, as well as damages, redress to consumers, and the imposition of a civil money penalty.

Although there have been other Redlining cases where lender representatives made comments substantiating their intent to Redline, the CFPB’s allegation is that Townstone made public comments of its intent.

July 16th, 2020|