Specifically, the Court focused on the following language in ECOA: In the Court’s review for this first step, the language of ECOA itself was analyzed. As noted in the Townstone decision, the first step in the Chevron analysis is to identify “whether Congress has spoken to the precise question at issue.” Id. Natural Resources Defense Council, Inc., 467 U.S. The CFPB’s argument in response noted that the discouragement prohibition in Regulation B “is authorized by and necessary to the ECOA” and recognized by courts “even when applied to prospective applicants.” In order to analyze the arguments by both the CFPB and Townstone, the court used a two-step framework identified in Chevron, U.S.A., Inc. The motion to dismiss by Townstone stated that the CFPB attempted to expand the reach of ECOA beyond the language of the statute and argued that ECOA does not regulate behavior relating to prospective applicants that have not yet applied for credit. In other words, the CFPB’s complaint alleged that Townstone’s low application rate from African-American applicants in the Chicago MSA (as compared to the rates of other lenders in the area) demonstrated that the radio show comments were, in fact, discouraging African Americans from applying with Townstone. The CFPB’s allegations of discouraging prospective applicants in violation of Regulation B were based on (1) comments made on the Townstone Financial Show, a radio show used as a marketing channel by Townstone to generate mortgage loan applications and (2) Home Mortgage Disclosure Act (HMDA) data reported by Townstone as compared to HMDA data reported by its “peer” lenders from African-American applicants in the Chicago-Naperville-Elgin Metropolitan Statistical Area (Chicago MSA) during the years 2014-2017. ![]() Specifically, Regulation B states:Ī creditor shall not make any oral or written statement, in advertising or otherwise, to applicants or prospective applicants that would discourage on a prohibited basis a reasonable person from making or pursuing an application. The CFPB’s original complaint, filed in July 2020, alleged that Townstone had violated the protections under ECOA based on Regulation B’s language that prohibits discouraging, on a prohibited basis, applications for credit. The decision demonstrates the importance of the statutory language of consumer finance laws, even if implementing regulations exist and are well established. The court declined to expand the reach of the Equal Credit Opportunity Act (ECOA) beyond the “express and unambiguous language of the statute” to include language from the CFPB’s implementing regulation, Regulation B, prohibiting discouragement of “prospective applicants” on a prohibited basis. The suit by the CFPB alleged that Townstone discouraged African-American prospective applicants in the Chicago metro area from applying for mortgages with Townstone due to remarks made by the Townstone President and CEO, Barry Sturner, on T he Townstone Financial Show. ![]() (Townstone), a nonbank residential mortgage lender and broker. ![]() District Court for the Northern District of Illinois dismissed with prejudice the lawsuit filed by the Consumer Financial Protection Bureau (CFPB) against Townstone Financial, Inc.
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