District Court Rejects Bid by Consumer Financial Protection Bureau and Townstone to Reverse Redlining Settlement

In a closely watched case, the US District Court declined a joint motion from the Consumer Financial Protection Bureau (CFPB) and Townstone Financial to vacate a November 2024 consent order that resolved allegations of redlining under the Equal Credit Opportunity Act (ECOA), as reported by Richard J. Andreano, Jr. & John L. Culhane, Jr. of Ballard Spahr.

The motion came after a shift in CFPB leadership and public criticism of how the case was handled under former Director Rohit Chopra. The Consumer Financial Protection Bureau had originally alleged that Townstone discouraged African-American applicants through statements made on its radio show, in violation of Regulation B, which prohibits discouraging prospective applicants.

After initially prevailing at the District Court in 2023, Townstone’s dismissal was overturned by the Seventh Circuit in 2024, which held that ECOA does apply to prospective applicants. A settlement followed, including a $105,000 penalty. However, in March 2025, the CFPB, under Acting Director Russ Vought, sought to reverse the agreement, citing misuse of agency power and First Amendment concerns, although the courts never ruled on the free speech argument.

The District Court denied the motion, citing the lack of “extraordinary circumstances” required under Rule 60(b)(6) and emphasizing the public interest in preserving the finality of judgments. The court also warned against setting a precedent that would allow new agency leadership to routinely unravel past settlements.

For compliance and risk professionals, the ruling reinforces the judiciary’s commitment to legal finality and underscores the limits of post-hoc policy reversals. Agencies should anticipate judicial resistance to attempts to vacate binding settlements, even amid shifting regulatory priorities.