As many of you know, our law firm represents Townstone Financial, which we are helping with its defense in a fair lending lawsuit brought by the CFPB.  Please see the reply our legal team in the case filed in support of Townstone’s Motion to Dismiss: Click Here. The case raises many important issues, such as: (1) the breadth of CFPB’s general rulemaking authority under ECOA; (2) the legality of the CFPB’s interpretations of its own Regulation B (for example, check out footnote 11); (3) the untested marketing discrimination theory; (4) whether the CFPB’s regulation and its application thereof violates the First Amendment’s freedom of speech; and (5) the Fifth Amendment’s “void for vagueness” doctrine.

Perhaps one of the most interesting issues in this case for any business subject to CFPB regulations is the breadth of the CFPB’s general rulemaking authority, which appears in many other consumer finance statutes, such as TILA.  Such rulemaking authority is typically drafted to state that the CFPB can promulgate rules that it deems necessary or proper to further the purposes or prevent evasion of the law.  The CFPB argues that this authority gives the agency authority to regulate activity that is not covered by the statute, and we argue, as you can see in our reply brief, that the authority is limited by the bounds of the statute.

We have been representing Townstone since the CFPB investigation began, and working on its Motion to Dismiss in the lawsuit.  It is a small company, and, obviously, defending itself against the federal government is a difficult and expensive task.  Please check out https://www.townstonefightsforfreespeech.com/ for more information about the case and ways you can help in this important case for the industry.

 If you would like to discuss any of the issues in this blog post, or are facing a government investigation or examination for fair lending or any other regulatory issues, contact Richard Horn at rich@garrishorn.com.