Motion to Dismiss in CFPB's Redlining Lawsuit Against Townstone Financial

I wanted to share our legal team’s motion to dismiss in the CFPB’s lawsuit against Townstone Financial, Inc. alleging redlining/marketing discrimination.  See the Motion to Dismiss here: Memorandum in Support of Motion to Dismiss. We are representing Townstone Financial along with our co-counsels in the case: Sean Burke of Mattingly Burke Cohen & Biederman LLP and Marx Sterbcow of the Sterbcow Law Group.

We made a number of arguments, including that: 

 1. The CFPB’s lawsuit violates the First Amendment because it is an attempt to suppress political speech. 

2. The CFPB’s lawsuit violates the Fifth Amendment’s due process clause because there is no fair notice of what is required under the CFPB’s marketing discrimination theory (e.g., has the CFPB defined what is a “peer lender” anywhere, or what percentage of applications you must receive from which demographics to comply?). 

3. The CFPB doesn’t have authority for its redlining claim under ECOA, because the CFPB’s lawsuit is based on marketing to “prospective applicants” but ECOA’s scope is limited to actual “applicants.”

4. The CFPB is attempting to impose affirmative obligations to purchase targeted marketing to certain demographics and to hire loan officers of certain demographics (i.e., a hiring quota), which obligations do not exist under ECOA.  I thought the days of “regulation by enforcement” were supposed to be over!

5. The CFPB is attempting to use an effects test by comparing HMDA application data between lenders, but ECOA does not support an effects test (disparate impact) theory. 

You can visit https://townstonefightsforfreespeech.com/ to find out more about the case. 

Please contact rich@garrishorn.com if you have any questions.