A District Court judge in Illinois has rejected a request by the Consumer Financial Protection Bureau to vacate a settlement reached with a mortgage lender after it was accused of racial discrimination, saying that doing so would open a “Pandora’s box” that he refuses to unlock. The CFPB back in March filed a motion seeking to vacate the $105,000 settlement that it reached with Townstone Financial, claiming the case lacked merit.
The case began in 2020, when the CFPB sued the company and its owner, accusing them of discouraging African-American borrowers in the Chicago area from applying for home loans. The allegations stemmed from statements made during a company-run radio show and podcast, which the CFPB claimed violated the Equal Credit Opportunity Act and the Consumer Financial Protection Act.
Initially, the district court dismissed the case, ruling that the ECOA did not apply to prospective applicants. That ruling was later reversed by the Court of Appeals for the Seventh Circuit, which remanded the case and held that Regulation B’s prohibition on discouragement did in fact extend to prospective applicants.
Rather than continue litigation, the parties entered into a stipulated judgment in November 2024. It included a $105,000 civil penalty, an injunction against ECOA violations, and five years of programmatic reforms. The court approved and finalized the settlement.
Judge Franklin U. Valderrama firmly denied the CFPB’s motion to vacate the settlement, writing that doing so would threaten the finality of judgments and allow new administrations to reverse prior settlements simply based on political preferences.
“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,” Judge Valderrama wrote.
He added that the request to vacate the settlement would establish a dangerous precedent:
“It would set a precedent suggesting that a new administration could seek to vacate or otherwise nullify the voluntary resolution of a case… merely because its leadership thought the original litigation unwise or improperly motivated. That is a Pandora’s box the Court refuses to open.”
The judge emphasized that the case’s voluntary nature, the public interest involved, and the absence of any adjudication on the First Amendment defense all weighed against vacating the settlement. He concluded that the arguments offered did not rise to the “extraordinary circumstances” necessary to do so.
The consent order remains in place, the $105,000 penalty stands, and the court’s jurisdiction over the five-year compliance period continues.
