US Court Denies CFPB Bid to Vacate Racial Discrimination Settlement

A federal judge in Chicago denied the Consumer Financial Protection Bureau's (CFPB) attempt to vacate a racial discrimination settlement with mortgage lender Townstone Financial, reaffirming the settlement's finality and rejecting arguments to relax rules for relief from judgment. Initially brought in 2020 during President Donald Trump’s first term, the case accused Townstone of redlining by discouraging Black homebuyers via derogatory comments in promotional materials. The CFPB, under Acting Director Russ Vought, sought to undo the settlement, claiming it was unjust and politically motivated to enforce diversity, equity, and inclusion (DEI) mandates in lending, but the court called such a reversal an "act of legal hara-kiri." Legal experts and fair housing advocates praised the ruling, emphasizing that allowing the CFPB's motion would undermine public confidence in the finality of judgments and set a dangerous precedent enabling new administrations to nullify prior settlements based on changes in agency leadership or policy. The judge, Franklin Valderrama, stressed that reopening the case would open a "Pandora's box" and refused to do so, thus upholding the integrity of the original settlement. This decision reflects a judicial check on the CFPB's efforts to withdraw from previously agreed enforcement actions amid political and ideological shifts.