Legal/Law/Criminal Justice and Reform

This Small Mortgage Company’s Legal Battle With A Federal Agency Raises Huge Free Speech Concerns, Advocates Say

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• The Consumer Financial Protection Bureau (CFPB) sued a small mortgage company over comments it made about Chicago crime, arguing that they could discourage potential minority applicants from applying.
• “This is a disturbing example of a government agency overstepping its authority to try to shut down speech on matters of public concern,” Aaron Terr, Foundation for Individual Rights and Expression (FIRE) director of public advocacy, told the Daily Caller News Foundation.
• Pacific Legal Foundation Attorney Jessica Thompson told the DCNF that the CFPB is overstepping the autority Congress granted, using a statute intended to prohibit discrimination to force creditors to “actively think about race in their marketing.”

The Consumer Financial Protection Bureau’s (CFPB) lawsuit against a small Chicago mortgage company raises troubling First Amendment issues, legal experts told the Daily Caller News Foundation.

The CFPB sued Townstone Financial in 2020 over a handful of statements owner Barry Sturner made on the radio about Chicago crime, alleging they “would discourage African-American prospective applicants from applying for mortgage loans” in violation of the Equal Credit Opportunity Act (ECOA), according to the initial 2020 complaint. The agency cites no examples of individuals who were discouraged from applying for a loan due to Sturner’s comments, which Sturner’s lawyers say shows its complaint is really about the content of his speech.

“This is a disturbing example of a government agency overstepping its authority to try to shut down speech on matters of public concern,” Aaron Terr, Foundation for Individual Rights and Expression (FIRE) director of public advocacy, told the Daily Caller News Foundation. “No American should have to pause before speaking about issues in their community and think, ‘Is the government going to jeopardize my livelihood for saying this?'”

Sturner co-hosts a weekly talk show, the Townstone Financial Show. The CFPB’s lawsuit cites statements made on the show, including a reference to the South Side of Chicago as “hoodlum weekend” and a place that would be “a real war zone” without the police, calling the majority African American city of Markham, Illinois, a place you drive “very fast through” and “don’t look at anybody or lock on anybody’s eyes” and joking that listeners getting ready to sell their home “take down their Confederate flags.”

A district court dismissed the case based on its determination that the ECOA does not apply to discouraging prospective applicants. But the CFPB persisted, appealing the case on April 3.

The Pacific Legal Foundation, which is representing Sturner, argues the case raises significant First Amendment and separation of powers concerns. PLF Attorney Jessica Thompson told the DCNF it’s problematic that CFPB is going after Townstone for statements “about public issues.”

Chicago Mayor Lori Lightfoot, she notes, also called parts of Chicago a “war zone” — one of the same phrases CFPB is now using to show Townstone violated the law. “CFPB is disagreeing with the content and the viewpoint that Barry Sturner and other people on the Townstone Show expressed,” Thompson said.

Moreover, the CFPB is overstepping the authority Congress granted, she said.

“Congress is supposed to write the laws, and the executive enforces those laws,” Thompson said. “But what CFPB has done is taken a statue that is intended to prohibit discrimination [and] flipped it upside down, so that now creditors must actively think about race in their marketing, in how many applications they recieve, in how they conduct their business and even in what they say publicly.”

A new rule makes the decision even more consequential. On Oct. 1, 2024, the CFPB’s small business data collection rule is set to take effect, which “will require more creditors to report demographic information about the loans that the creditor makes,” according to Thompson.

“Taking that data, CFPB will now be able to go after creditors in other interest groups who make statements that CFPB disagrees with and things could discourage prospective applicants,” she said.

PLF remains optimistic about the upcoming appeal.

“We look forward to the opportunity to establish on appeal that CFPB went far beyond its statutory authority in the Townstone case,” Steve Simpson, a senior attorney at Pacific Legal Foundation, told the DCNF. “CFPB’s claims that Townstone discouraged prospective applicants were unfounded from the beginning. No borrower has ever complained about Townstone’s lending practices or statements on the radio. Pacific Legal Foundation is proud to represent Barry Sturner and Townstone Financial, free of charge, in their next battle against the CFPB.”

The CFPB declined to comment.