On June 12, the U.S. District Court for the Northern District of Illinois denied the joint motion by the Consumer Financial Protection Bureau (CFPB or Bureau) and Townstone Financial, Inc. to vacate the Stipulated Final Judgment and Order previously entered in the CFPB’s enforcement action against the mortgage lender, calling the CFPB’s attempt to refund Townstone’s civil money penalty for alleged redlining practices “breathtaking.” This decision comes after allegations by the current CFPB of misconduct related to the case under former CFPB leadership.
Background
As previously discussed, the CFPB initially settled with Townstone in November 2024, concluding the first redlining case against a nonbank mortgage lender. The settlement followed a Seventh Circuit decision affirming the applicability of Regulation B’s prohibition on “discouragement” to prospective applicants. Townstone was accused of discouraging African American applicants through statements made in its radio shows and podcasts. The case settled, with Townstone agreeing to pay a $105,000 penalty and accept a prohibition against future ECOA violations.
In March 2025, the CFPB and Townstone jointly filed a Rule 60(b)(6) motion to vacate the settlement based on “extraordinary circumstances,” citing flaws in the Bureau’s investigation and litigation, including alleged targeting based on the political views of Townstone’s owner, Barry Sturner. The motion was supported by a declaration from Dan Bishop, Senior Advisor to the Bureau’s Acting Director, highlighting the lack of substantial evidence and improper motivations behind the enforcement action. In opposition to the motion, fourteen nonprofit fair housing and consumer protection organizations filed an amicus brief arguing that the CFPB and Townstone failed to clear the high bar set by Rule 60(b)(6).
Court Order
Federal District Judge Franklin Valderrama denied the motion to vacate the settlement, emphasizing the critical importance of preserving the finality of judgments. The court’s decision was grounded in the principle that “there must be an end to litigation someday,” underscoring that “free, calculated, deliberate choices are not to be relieved from.”
Judge Valderrama found that the parties failed to meet their substantial burden of demonstrating “extraordinary circumstances” necessary to justify relief under Rule 60(b)(6). He highlighted that the motion was unprecedented, as it sought to undo a settlement voluntarily entered into by both parties. The judge remarked, “The voluntary nature of the resolution of this case cannot be overemphasized,” pointing out that the consent decree was a product of mutual agreement and not a decision imposed by the court. The judge also highlighted that the settlement was not a private matter between two parties. Rather, the settlement addressed wrongdoing that affected the public by enjoining Townstone from violating the law.
The court found unpersuasive the CFPB’s assertion that it recently discovered that the case lacked actual evidence of discrimination, calling that assertion “breathtaking.” “Recall that the investigation and initiation of the lawsuit occurred during President Trump’s first term, not under some previous administration. Presumably, CFPB launched the lawsuit after it determined that there was a legal and factual basis for the suit. Apparently, that was not the case. 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..” The court also noted that the Bureau’s argument raised the question of whether the CFPB had violated Rule 11(b) of the Federal Rules of Civil Procedure for filing a lawsuit without factual or legal basis but stated it would not determine whether the CFPB had violated Rule 11 because it was denying the motion.
In response to the argument that prior CFPB leadership had trampled on the defendants’ First Amendment rights, the court agreed that it is indeed impermissible for government agencies to target people or entities because of protected speech but found that nether this court nor the Seventh Circuit addressed the defendants’ First Amendment argument during the course of the litigation.
Moreover, the court agreed with arguments in the amicus brief filed in opposition to the joint motion that vacating the judgment would “erode public confidence in the finality of judgments” and set a dangerous precedent for renegotiating settlements with each new administration.
