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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

Bureau of Consumer Financial ) 

Protection, ) Case No.

) 

Plaintiff, ) 

) 

v. ) 

) 

) 

Townstone Financial, Inc., ) 

) 

 Defendant. ) 

COMPLAINT

The Bureau of Consumer Financial Protection (“Bureau”) files this Complaint

against Townstone Financial, Inc. (“Townstone”) and alleges as follows.

INTRODUCTION

1. The Bureau brings this action against Townstone under the Equal Credit

Opportunity Act (“ECOA”), 15 U.S.C. §§ 1691–1691f, and the Consumer Financial 

Protection Act of 2010 (“CFPA”), 12 U.S.C. § 5536(a)(1)(A), to remedy 

discrimination in Townstone’s mortgage lending.

2. ECOA and its implementing regulation, Regulation B, 12 C.F.R. pt.

1002, make it illegal for a creditor to discriminate against an applicant in any aspect of 

a credit transaction on the basis of, among other characteristics, race, color, or

national origin. 15 U.S.C. § 1691(a); 12 C.F.R. § 1002.4(a). ECOA and Regulation B

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prohibit any statements, acts, or practices that would discourage on a prohibited basis 

an applicant or prospective applicant from applying for credit. 15 U.S.C. § 1691(a); 12 

C.F.R. § 1002.4(b); 12 C.F.R. pt. 1002, Supp. I, 1002.4(b)(1) (“In keeping with the 

purpose of the Act—to promote the availability of credit on a nondiscriminatory 

basis—§ 1002.4(b) covers acts or practices directed at prospective applicants that 

could discourage a reasonable person, on a prohibited basis, from applying for 

credit.”).

3. Regulation B also provides that “prohibited basis” in ECOA includes 

“the characteristics of individuals with whom an applicant is affiliated or with whom 

the applicant associates,” such as “the race of other residents in the neighborhood 

where the property offered as collateral is located.” 12 C.F.R. pt. 202, Supp. I, 

202.2(2)(z).

4. From January 1, 2014, through December 31, 2017 (“the relevant 

period”), Townstone was a non-depository mortgage lender and mortgage broker

exclusively engaged in retail-mortgage lending. Based on Home Mortgage Disclosure 

Act (“HMDA”) data from 2014 through 2017, Townstone received an average of 740 

mortgage-loan applications each year. Townstone acted as a correspondent lender for 

the overwhelming majority of its business and also brokered an average of 60 total 

Federal Housing Administration and Veterans Administration home loans each year.

During the relevant period, Townstone ranked in the top 10% of lenders that drew

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applications from the Chicago-Naperville-Elgin Metropolitan Statistical Area 

(“Chicago MSA”). 

5. From at least 2014 through 2017, Townstone engaged in unlawful 

redlining and acts or practices directed at prospective applicants that would

discourage prospective applicants, on the basis of race, from applying for credit in the 

Chicago MSA.

JURISDICTION AND VENUE

6. This Court has subject-matter jurisdiction over this action because it is 

brought under “Federal consumer financial law,” 12 U.S.C. § 5565(a)(1); presents a 

federal question, 28 U.S.C. § 1331; and is brought by an agency of the United States, 

28 U.S.C. § 1345.

7. Venue is proper in this district because Townstone is located, resides, 

and does business in this district. 12 U.S.C. § 5564(f).

8. The Bureau is an independent agency of the United States created by the 

CFPA. 12 U.S.C. § 5491(a). The Bureau has independent litigating authority, including 

the authority to enforce ECOA. 12 U.S.C. §§ 5564(a)–(b), 5481(12)(D) & (14).

9. Townstone is incorporated in the State of Illinois and headquartered in 

Chicago. Townstone operates in five states—Illinois, Indiana, Michigan, Wisconsin, 

and Florida—with over 90% of its mortgage lending in the Chicago MSA.

10. Townstone is subject to the federal laws governing fair lending, 

including ECOA and its implementing regulation, Regulation B.

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11. Townstone is a “creditor” under ECOA. 15 U.S.C. § 1691a(e).

12. Townstone is a “covered person” under the CFPA. 12 U.S.C. 

§ 5481(6)(A) & (15)(A)(i).

FACTUAL ALLEGATIONS

13. During the relevant period, Townstone engaged in acts or practices 

directed at prospective applicants that discouraged, on the basis of race, prospective 

applicants from applying to Townstone for credit in the Chicago MSA. Specifically, 

during its weekly marketing radio shows and podcasts, Townstone made statements 

about African Americans and predominantly African-American neighborhoods that 

would discourage African-American prospective applicants from applying to 

Townstone for mortgage loans.

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14. In addition, during the relevant period, Townstone engaged in unlawful 

redlining by making these discouraging statements and engaging in additional acts or 

practices that (a) discouraged prospective applicants living in African-American 

neighborhoods in the Chicago MSA from applying to Townstone for mortgage loans; 

and (b) discouraged prospective applicants living in other areas from applying to 

Townstone for mortgage loans for properties in African-American neighborhoods in 

the Chicago MSA.

 1 For purposes of this Complaint, “mortgage loans” refers to all loans that Townstone 

was required to report under HMDA, 12 U.S.C. §§ 2801–2810, and “mortgage 

lending” refers to providing those loans.

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15. Townstone acted to meet the credit needs of majority-white 

neighborhoods in the Chicago MSA while avoiding the credit needs of majorityAfrican-American neighborhoods, thereby discouraging prospective applicants from 

applying to Townstone for mortgage loans in those neighborhoods.

16. A majority-African-American neighborhood or area is a census tract in 

which more than 50% of the residents are identified in the U.S. Census as either 

“Black or African American.” A high-African-American neighborhood or area is a 

census tract in which more than 80% of the residents are identified in the U.S. Census 

as either “Black or African-American.”

17. The Chicago MSA comprises 14 counties in three states: Cook County, 

DuPage County, Grundy County, Kendall County, McHenry County, Will County, 

DeKalb County, Kane County, and Lake County, Illinois; Jasper County, Lake 

County, Newton County, and Porter County, Indiana; and Kenosha County, 

Wisconsin.

18. As of 2010, the Chicago MSA included about 1.6 million African

Americans.

19. As of 2010, the Chicago MSA’s population was 9,461,105, of which 17%

were African Americans. According to the U.S. Census Bureau, 30.1% of residents of 

the City of Chicago are African-American. 

20. As of 2010, 18.7% of the Chicago MSA’s 2,215 census tracts were 

majority-African-American and 13.8% were high-African-American.

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21. During the relevant period, Townstone drew about 2,700 mortgage-loan 

applications from and originated about 1,800 mortgage loans in the Chicago MSA.

22. During the relevant period, Townstone drew over 90% of its mortgageloan applications for properties within the Chicago MSA. 

Townstone Financial Show

23. Townstone’s business model was to market and draw mortgage-loan

applications primarily through radio advertising.

24. Throughout the relevant period, Townstone marketed through “The 

Townstone Financial Show,” its own radio show and podcast. Since at least 2014, the 

Townstone Financial Show has been directly affiliated with Townstone’s lending 

business. In 2014, the show was hosted by Townstone’s co-owner and president. 

Beginning in about January 2015, the Townstone Financial Show was co-hosted by

Townstone’s CEO and now sole owner, its vice-president, who was also a loan 

officer, and another senior loan officer. Townstone generated up to 90% of its 

mortgage-loan applications from radio advertising, including through this show.

25. During the relevant period, the Townstone Financial Show was

distributed in two media: a weekly radio show on AM radio that reached the entire 

Chicago MSA and a weekly podcast available exclusively online. During the relevant 

period, all Townstone Financial Show radio broadcasts and podcasts were available on 

the Townstone website. Both the radio show and podcast were streamed on 

Facebook Live and then advertised on Facebook, Twitter, and LinkedIn. 

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26. During the relevant period, Townstone’s website and the Townstone 

Financial Show described the hosts as “Chicago real-estate experts.”

27. During the relevant period, the hosts started the Townstone Financial 

Show podcasts by stating Townstone’s licensing information, including that 

Townstone is a licensed mortgage broker/banker, NMLS number 136639, Illinois 

residential-mortgage licensee number 6629. 

28. During the relevant period, the Townstone Financial Show radio 

broadcasts included an introductory statement such as: “This show is brought to you 

by Townstone Financial, the home-loan expert since 2002. Townstone Financial is an 

Indiana, Michigan, Wisconsin, Florida, Illinois mortgage licensee 6629, NMLS 

136639. Remember no one values your mortgage business more than Townstone 

Financial.”

29. The Townstone Financial Show is an infomercial that also includes 

advertisements for Townstone during commercial breaks. During the relevant period, 

the hosts discussed mortgage-related issues and took questions from prospective 

applicants. The hosts regularly referred to their work at Townstone and promoted the 

benefits that potential applicants might expect from applying for mortgage loans from

Townstone.

30. During the relevant period, the co-hosts of the Townstone Financial 

Show made a number of statements on the show, across multiple episodes, that would 

discourage African-American prospective applicants from applying to Townstone for 

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mortgage loans, would discourage prospective applicants living in African-American 

neighborhoods from applying to Townstone for mortgage loans, and would 

discourage prospective applicants living in other areas from applying to Townstone 

for mortgage loans for properties in African-American neighborhoods. 

31. For example, in a January 2017 episode of the Townstone Financial 

Show, during which Townstone marketed its services, the hosts discussed a nowreplaced grocery store in downtown Chicago that was part of the Jewel-Osco grocerystore chain. Townstone’s CEO described “[having] to go to the Jewel on Division. . . .

We used to call it Jungle Jewel. There were people from all over the world going into 

that Jewel. It was packed. It was a scary place.” 

32. Referring to a neighborhood grocery store with “people from all over 

the world” as a “jungle”—a word that may be used or understood to be a derogatory 

reference associated with African Americans, Black people, and foreigners—and 

saying that the grocery store was “scary” would discourage African-American

prospective applicants from applying for mortgage loans from Townstone; would 

discourage prospective applicants living in African-American neighborhoods from 

applying to Townstone for mortgage loans; and would discourage prospective 

applicants living in other areas from applying to Townstone for mortgage loans for 

properties in African-American neighborhoods. 

33. In a June 2016 episode of the Townstone Financial Show, before 

discussing the mortgage-lending services that Townstone could provide to police 

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officers and others, Townstone’s CEO stated that the South Side of Chicago between 

Friday and Monday is “hoodlum weekend” and that the police are “the only ones 

between that turning into a real war zone and keeping it where it’s kind of at.” 

Chicago’s South Side refers to the southern neighborhoods in the City of Chicago and 

is majority-African-American, with about 489,000 African Americans currently living 

there. 

34. A mortgage lender and self-described real-estate expert referring to 

Chicago’s South Side as “hoodlum weekend” would discourage prospective applicants 

living in the South Side from applying to Townstone for mortgage loans and would 

discourage prospective applicants living in other areas from applying to Townstone 

for mortgage loans for properties in this particular African-American community

because the comments indicate that Townstone’s CEO, speaking during an official 

Townstone marketing program, believes that the area’s defining characteristic is that it 

is dangerous and full of criminals. Moreover, because the statement is disparaging 

toward a majority-African-American area, African-American prospective applicants 

throughout the Chicago MSA would also be discouraged from applying for mortgage

loans from Townstone. 

35. In a November 11, 2017 episode of the Townstone Financial Show,

during which Townstone marketed its services, Townstone’s senior loan officer 

discussed a recent skydiving experience and the ensuing “rush” from the jump;

Townstone’s vice-president responded that he thought skydiving was crazy and 

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suggested that “walking through the South Side at 3AM [would] get the same rush.”

36. Referring to a majority-African-American neighborhood—Chicago’s 

South Side—as a place where simply walking through it would provide a “rush” 

would discourage, on the basis of race, a prospective applicant living in or applying 

for a mortgage loan in that area from applying to Townstone because self-described 

real-estate experts are portraying the area as defined by its danger. And because the 

statement is disparaging toward a majority-African-American area, African-American 

prospective applicants would also be discouraged from applying for mortgage loans

from Townstone. 

37. In January 2014, while wrapping up a radio broadcast of the Townstone 

Financial Show, during which Townstone marketed its services, Townstone’s 

president stated, “it’s a great time to buy, it’s a great time to rent, it’s a great time to 

sell.” He and that episode’s co-hosts, a local realtor and a bankruptcy attorney, then 

gave advice on how to get a home ready for sale, which included “change the light 

fixtures,” “paint it from top to bottom,” and “take down the Confederate flag.”

38. Joking about a symbol of racial animus or implying that the Townstone 

Financial Show’s hosts and listeners might display such symbols in their homes would 

discourage African-American prospective applicants from applying for mortgage 

loans with Townstone; would discourage prospective applicants living in AfricanAmerican neighborhoods from applying to Townstone for mortgage loans; and would 

discourage prospective applicants living in other areas from applying to Townstone 

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for mortgage loans for properties in African-American neighborhoods.

39. During another radio broadcast in January 2014, during which 

Townstone marketed its services, a caller from Markham, Illinois, asked how he and 

his wife could improve their credit scores. Markham is a city in Cook County, Illinois,

and its population is 80.3% Black or African-American, according to the U.S. Census 

Bureau. Townstone’s president responded that the caller’s wife is “a woman and she 

probably doesn’t have good credit because she’s a woman,” and that “[you’ve] got to 

keep those women in line over there in Markham.” After further discussing the 

couple’s credit concerns, he noted that “it’s crazy in Markham on weekends” and that 

“I know, I’ve been to Markham.” “You drive very fast through Markham,” he 

continued, “and you don’t look at anybody or lock on anybody’s eyes in 

Markham . . . . You look at your dashboard, you don’t lock on anybody.” 

Townstone’s president closed the segment by telling the caller to “stop spending 

freaking money [on his wife] and tell her to get a better job.”

40. Disparaging a majority-African-American city as “crazy,” a place to be 

driven through quickly, and an area where people should avoid eye contact, would 

discourage African-American prospective applicants from applying to Townstone for 

mortgage loans; would discourage prospective applicants living in African-American 

neighborhoods from applying to Townstone for mortgage loans; and would 

discourage prospective applicants living in other areas from applying to Townstone 

for mortgage loans for properties in African-American neighborhoods.

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Targeted Marketing

41. Even though African Americans made up 30% of the population of the 

City of Chicago, Townstone made no effort to market directly to African-Americans 

during the relevant period. 

42. Townstone has not specifically targeted any marketing toward AfricanAmericans in the Chicago MSA. 

43. Townstone employed 17 loan officers during the relevant period. 

Townstone did not employ an African-American loan officer during the relevant 

period, even though it was aware that hiring a loan officer from a particular racial or 

ethnic group could increase the number of applications from members of that racial 

or ethnic group. 

Applications from African-American Neighborhoods

44. At least during the relevant period, Townstone’s statements, acts, and 

practices directed at prospective applicants, including statements made on the 

Townstone Financial Show, discouraged prospective applicants living in or seeking 

credit to purchase properties in majority-African-American neighborhoods from 

applying for credit from Townstone in the Chicago MSA. 

45. Townstone drew few applications from African-American applicants 

throughout the Chicago MSA during the relevant period. From 2014 through 2017, 

Townstone drew about 2,700 applications, of which only 37 (1.4%) came from 

African-Americans in the Chicago MSA. During the same period, other mortgage 

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lenders in the Chicago MSA drew 1,217,223 applications, of which 119,370 (9.8%) 

came from African-American applicants. 

46. Similarly, Townstone drew almost no applications from prospective 

applicants applying for mortgage loans for properties in African-American 

neighborhoods. During the relevant period, Townstone drew an average of five or six 

applications each year (0.8%, 0.8%, 0.7%, and 0.9% of all Townstone applications) for 

properties in high-African-American neighborhoods, even though such 

neighborhoods made up 13.8% of the Chicago MSA’s census tracts. Of Townstone’s 

five or six applications each year for properties in high-African-American 

neighborhoods (more than 80% African-American), more than half each year were 

from non-Hispanic white applicants.

47. Similarly, only 2.3%, 1.4%, 1.4%, and 2.2% of Townstone’s applications 

for the years 2014 through 2017, respectively, came from prospective applicants 

applying for mortgage loans for properties in majority-African-American areas, even 

though 18.7% of the Chicago MSA’s census tracts were majority-African-American. 

See Exhibit A. 

48. Statistical analyses of Townstone’s mortgage-loan applications in the 

Chicago MSA, as compared to its peer lenders during the relevant period, show 

disparities between Townstone and its peers in drawing mortgage-loan applications 

for properties in African-American neighborhoods. These disparities are statistically 

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significant2 and demonstrate that there were applicants seeking mortgage loans for 

properties in African-American neighborhoods in the Chicago MSA from 

Townstone’s peers in much higher proportions than from Townstone. These 

disparities further show that Townstone had no legitimate, non-discriminatory reason 

to draw relatively few applications for mortgage loans for properties in these AfricanAmerican areas.

49. Specifically, Townstone drew a significantly smaller proportion of 

mortgage-loan applications for properties in majority-African-American 

neighborhoods than its peer lenders operating in the Chicago MSA. While Townstone 

drew 2.3%, 1.4%, 1.4%, and 1.3% of its applications for properties in majorityAfrican-American neighborhoods from 2014 through 2017, respectively, Townstone’s 

peers drew 8.2%, 7.6%, 7.7%, and 8.1%—3.6, 5.4, 5.5, and 6.2 times that of 

Townstone. 

50. Similarly, Townstone drew a significantly smaller proportion of 

mortgage-loan applications for properties in high-African-American neighborhoods 

than its peers operating in the Chicago MSA. While Townstone drew only 0.8%, 

0.8%, 0.7%, and 0.9% of its applications for mortgage loans for properties in highAfrican-American census tracts from 2014 through 2017, respectively, other similar 

 2 Statistical significance measures the probability that an observed outcome could have 

occurred by chance. As used in this Complaint, an outcome is statistically significant if 

the probability that it could have occurred by chance is less than 5%.

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lenders drew 5.3%, 4.9%, 5.1%, and 5.5% of their applications from such census 

tracts—6.3, 6.2, 7.7 and 6.1 times that of Townstone. 

51. The totality of Townstone’s statements, acts, and practices described 

herein constitute redlining of African-American neighborhoods in the Chicago MSA 

and discouragement on the basis of race. Townstone’s statements, acts, and practices 

directed at prospective applicants are intended to discourage prospective applicants 

on the basis of their race or the racial composition of their neighborhoods, or have 

the effect of discouraging on such bases, African Americans and prospective 

applicants seeking credit to purchase homes in majority-African-American 

neighborhoods in the Chicago MSA from obtaining mortgage loans.

COUNT 1: ECOA VIOLATIONS

52. The Bureau incorporates the allegations in Paragraphs 1–51 here by 

reference.

53. Townstone’s statements, acts, and practices directed at prospective 

applicants discouraged, on the basis of race, prospective applicants from applying for 

credit and constituted unlawful redlining, in violation of Regulation B and ECOA. 12 

C.F.R. § 1002.4(b); 15 U.S.C. § 1691(a)(1). 

54. Townstone discriminated against prospective applicants and applicants 

with respect to credit transactions on the basis of race, in violation of ECOA.

15 U.S.C. § 1691(a)(1).

55. Townstone’s practices constitute a pattern or practice of discrimination 

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and discouragement, in violation of ECOA. 15 U.S.C. § 1691(a)(1).

COUNT 2: CFPA VIOLATIONS

56. The Bureau incorporates the allegations of Paragraphs 1–51 here by 

reference.

57. Section 1036(a)(1)(A) of the CFPA prohibits a covered person from 

offering or providing to a consumer any financial product or service not in 

conformity with “Federal consumer financial law” or otherwise committing any act or 

omission in violation of a “Federal consumer financial law.” 12 U.S.C. 

§ 5536(a)(1)(A).

58. Townstone’s ECOA violations, described above in Count 1, constitute 

violations of § 1036(a)(1)(A) of the CFPA. 12 U.S.C. § 5536(a)(1)(A).

DEMAND FOR RELIEF

WHEREFORE, the Bureau requests that the Court enter an ORDER that:

(1) declares that the statements, acts, and practices of Townstone constitute 

violations of ECOA, 15 U.S.C. §§ 1691–1691f;

(2) requires Townstone, under 15 U.S.C. § 1691c(a)(9) and 12 U.S.C. 

§ 5565(a), as well as Townstone’s agents, employees, successors, and all others in 

active concert or participation with Townstone, to:

a. not discriminate in any aspect of its mortgage-lending business on the 

basis of race or any other basis prohibited by ECOA, 15 U.S.C. § 1691(a);

b. take such affirmative steps as may be necessary to restore, as nearly as 

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practicable, the victims of Townstone’s unlawful conduct to the position they 

would have been in but for the discriminatory conduct; and

c. take such affirmative steps as may be necessary to prevent the recurrence 

of any such discriminatory conduct; to eliminate, to the extent practicable, the 

effect of Townstone’s unlawful practices; and to implement policies and 

procedures to ensure that all applicants and prospective applicants have an

equal opportunity to seek and obtain loans on a non-discriminatory basis and 

with non-discriminatory terms and conditions; 

(3) awards damages, restitution, equitable, and other monetary relief, under

15 U.S.C. § 1691c(a)(9) and 12 U.S.C. § 5565; 

(4) assesses a civil money penalty against Townstone in an amount 

authorized by 12 U.S.C. § 5565(c); 

(5) awards the costs of bringing this action; and

(6) awards such additional relief as the interests of justice may require.

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Respectfully submitted,

THOMAS G. WARD

Enforcement Director

CARA PETERSEN

Principal Deputy Enforcement Director

JEFFREY PAUL EHRLICH

Deputy Enforcement Director

KARA K. MILLER

Assistant Litigation Deputy

/s/ Michael G. Salemi

MICHAEL G. SALEMI, IL ARDC 6279741

Email: michael.salemi@cfpb.gov

VINCENT HERMAN DC Bar #974596

Email: vincent.herman@cfpb.gov

BARRY REIFERSON NY Reg. #4343893

Email: barry.reiferson@cfpb.gov

230 S. Dearborn Street 

Suite 1590

Chicago, IL 60604

 and

1700 G Street, NW

Washington, DC 20552

Telephone: (202) 435-9599

Attorneys for the Bureau of Consumer Financial Protection

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