A LinkedIn post from counsel revealed Townstone Financial, a mortgage broker located in Chicago, and the Consumer Financial Protection Bureau (CFPB) have entered into a settlement to resolve allegations of redlining and violations of the Equal Credit Opportunity Act (ECOA).

The CFPB brought its suit in 2020, and in 2023, a judge for the U.S. District Court for the Northern District of Illinois granted Townstone’s motion to dismiss the case, holding the bureau had overextended its statutory authority beyond Congress’ intentional delegation by attempting to imbue pre-applicants for credit with ECOA protections. The CFPB appealed, and in July, the Seventh Circuit Court of Appeals overturned the lower court, referring to Congressional records to discern legislative intent.

“The Consumer Financial Protection Bureau and Townstone Financial have agreed to end the litigation and settle the case for a minimal amount of money and the CFPB has dropped Barry Sturner [Townstone’s owner] individually with prejudice from the litigation,” Marx Sterbcow, managing attorney at the Sterbcow Law Group, posted on LinkedIn. “Would have loved to have won the case in court but a minimal amount of money made sense for everyone to get rid of this absurd lawsuit. Congrats to Barry Sturner and look forward to the judge signing off on this.”

The CFPB also issued a press release on the matter.

“The CFPB’s lawsuit against Townstone Financial included a major appellate court victory that makes clear that people are protected from illegal redlining even before they submit their application,” CFPB Director Rohit Chopra said. “The CFPB will continue to prosecute those who engage in modern-day redlining.”

This is a developing story. Check back with RESPA News for updates soon.