A federal judge Thursday denied an attempt by the Consumer Financial Protection Bureau to vacate a Biden-era redlining settlement against Townstone Financial.
Acknowledging that the joint filing to undo a settlement was “unusual” and “unprecedented,” Judge Franklin Valderrama determined that dismissing the redlining order would “erode public confidence in the finality of judgments.”
Vacating the CFPB’s earlier settlement with Townstone “would set a precedent suggesting that a new administration could seek to vacate or otherwise nullify the voluntary resolution of a case between a prior administration (or the same administration, but under different agency leadership) and a private party merely because its leadership thought the original litigation unwise or improperly motivated,” the judge wrote.
“That is a Pandora’s box the Court refuses to open,” he added.
The CFPB’s chief legal officer, Mark Paoletta, and attorneys for Townstone filed a joint motion in March to vacate the final judgment that accused the Chicago-based firm of discouraging residents living in majority-Black neighborhoods from applying for mortgages in the city’s metropolitan area through comments made on a radio show and podcast.
The lawsuit was initially brought by former CFPB Director Kathleen Kraninger, an appointee from President Donald Trump’s first term, after identifying Townstone’s shortcomings.
“Now, current CFPB leadership under the second Trump administration, in an act of legal hara-kiri that would make a samurai blush, falls on the proverbial sword and attests that the lawsuit lacked a legal or factual basis,” Valderrama said.
However, the current CFPB leadership asserted that its decision was not due to a change in management, but rather because it “discovered” the case lacked evidence of discrimination, had no consumer complaints, and was pursued because the CFPB under the previous administration had objected to Townstone’s speech. The judge brushed off the claim, describing it as “breathtaking" but “unpersuasive.”
The parties sought a refund of the $105,000 Townstone paid the CFPB as part of the order – a precedent that would raise the “specter that payments made to third parties as part of consent decrees may also be clawed back,” the judge contended.
Since the Trump administration has taken over, the CFPB has dropped more than 20 lawsuits, most of which date to the Biden era.
“The more we uncover at CFPB, the more we see how this agency was weaponized against targeted Americans,” Acting Director Russ Vought said in a statement, while seeking to vacate Townstone’s redlining order.
The National Fair Housing Alliance led a coalition of civil rights and consumer protection groups, which filed an amicus brief opposing the motion filed by the CFPB to dismiss the case. Sasha Samberg-Champion, NFHA’s special counsel for civil rights, applauded the judge’s decision.
“We are gratified that Judge Valderrama rejected the Administration’s efforts to reverse the Townstone settlement and swing the door open for the Administration to undo more key civil rights settlements,” Samberg-Champion said in a prepared statement. “This decision should make clear how lawless the Administration’s actions are and embolden others to oppose them.”
