IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

BUREAU OF CONSUMER 

FINANCIAL PROTECTION,

Plaintiff,

v.

TOWNSTONE FINANCIAL, INC. and 

BARRY STURNER,

Defendants.

No. 20-cv-4176

Judge Franklin U. Valderrama

MEMORANDUM OPINION AND ORDER

The Equal Credit Opportunity Act (ECOA) makes it “unlawful for any creditor 

to discriminate against any applicant with, respect to any aspect of a credit 

transaction . . . on the basis of race, color, religion, national origin, sex or marital 

status, or age . . . .” 15 U.S.C. § 1691(a). The ECOA’s implementing regulation,

Regulation B, extends the ECOA’s prohibition to “prospective applicants.” 12 C.F.R. 

§ 1002.4(b). The Bureau of Consumer Financial Protection (CFPB) filed this lawsuit 

against Townstone Financial, Inc. (Townstone), a mortgage broker/lender and its 

owner Barry Sturner (Sturner) (collectively, Defendants) for allegedly discouraging 

prospective African-American applicants in the Chicago metropolitan area from 

applying for mortgages. R. 27, First Amended Complaint (FAC).1 Defendants have 

moved to dismiss the FAC with prejudice. R. 31, Mot. Dismiss. For the following 

reasons, Defendants’ motion to dismiss is granted. 

1Citations to the docket are indicated by “R.” followed by the docket number and, where 

necessary, a page or paragraph citation.

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Background

I. The Parties

The CFPB is an independent agency of the United States created by the

Consumer Financial Protection Act of 2010 (CFPA), with authority to enforce the 

CFPA and ECOA. FAC ¶ 8.2 Townstone is a mortgage broker/lender headquartered 

in Chicago, which operates in Illinois, Indiana, Michigan, Wisconsin, and Florida. Id.

¶ 9. Most of Townstone’s mortgage lending and brokering takes place in the ChicagoNaperville-Elgin Metropolitan Statistical Area (Chicago MSA). Id. ¶¶ 4, 9. Sturner is 

Townstone’s co-founder, sole owner, sole director, President, and Chief Executive 

Officer. Id. ¶ 13. Sturner is also a loan officer. Id.

II. The Townstone Financial Show

Starting as early as 2014, Townstone has marketed its services through its 

own radio show and podcast called “The Townstone Financial Show.” FAC ¶ 24. The 

Townstone Financial Show was conducted weekly on AM radio and reached the entire 

Chicago MSA. Id. ¶ 29. A weekly podcast of the radio show is also made available 

online, and the show has been streamed on Facebook Live and advertised on 

Facebook, Twitter, and LinkedIn. Id. The Townstone Financial Show is a long-form 

commercial advertisement, in which the hosts discuss mortgage-related issues on the 

show and take questions from prospective applicants. Id. ¶ 26. Since about January 

2015, the Townstone Financial Show has been co-hosted by Sturner and another 

2The Court accepts as true all of the well-pled facts in the FAC and draws all reasonable 

inferences in favor of the CFPB. Smith v. City of Chicago, 3 F.4th 332, 334 n.1 (7th Cir. 2021) 

(internal citation omitted).

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senior loan officer. Id. ¶ 27. Townstone’s website and the Townstone Financial Show 

characterize the hosts of the Townstone Financial Show as “Chicago real-estate 

experts.” Id. ¶ 28. 

The Townstone Financial Show has allegedly included statements that would 

discourage African-American prospective applicants from applying for mortgage 

loans from Townstone. FAC ¶ 32. For instance, during a January 2014 broadcast of 

the Townstone Financial Show, a caller from Markham, Illinois, a city with an 80.3% 

African-American population, asked how he and his wife could improve their credit 

scores. Id. ¶ 33. The Townstone host responded that “[you’ve] got to keep those women 

in line over there in Markham.” Id. The host went on to state that the caller should 

“stop spending freaking money [on his wife] and tell her to get a better job.” Id. While

discussing the couple’s credit concerns, the host turned his comments toward 

Markham generally, claiming that “it’s crazy in Markham on weekends” and stating, 

“I know, I’ve been to Markham.” Id. “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.” Id.

In the same month, Townstone’s then-president informed listeners on the 

Townstone Financial Show that it was a great time to buy, rent, and sell. FAC ¶ 34. 

The show’s hosts, including a local realtor and a bankruptcy attorney, recommended 

that the listeners who were preparing a home for sale should take down their 

Confederate flags. Id.

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In a June 2016 episode of the Townstone Financial Show, Sturner volunteered 

his view of the South Side of Chicago, an area that is majority-African American. FAC 

¶ 35. Sturner stated that the South Side of Chicago is “hoodlum weekend” between 

Friday and Monday, and that the police are “the only ones between that [area]

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

In January 2017, on the Townstone Financial Show, Sturner and the other 

hosts discussed a now-replaced grocery store in downtown Chicago that was part of 

the Jewel-Osco grocery-store chain. FAC ¶ 36. Sturner described “[having] to go to 

the Jewel on Division,” which he referred to as “Jungle Jewel.” Id. Sturner called the 

“Jungle Jewel” a “scary place,” attributing his fear and the store’s nickname to the 

“Jungle Jewel’s” patrons who “packed” the store and “were people from all over the 

world.” Id.

In a November 2017 episode, Townstone’s senior loan officer discussed a recent 

skydiving experience and the ensuing “rush” from the jump. FAC ¶ 37. Another 

Townstone host responded that he thought skydiving was crazy, and suggested that 

someone who walked “through the South Side at 3AM.” could get the “same rush.” Id.

Despite African Americans making up 30% of the population of the City of 

Chicago, Townstone has not targeted any marketing toward African Americans in the 

Chicago MSA. FAC ¶ 40.

III. Applications from African-American Neighborhoods

Based on Home Mortgage Disclosure Act data from 2014 through 2017, 

Townstone received an average of 740 mortgage-loan applications each year. FAC 

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¶ 42. Townstone brokered an average of 60 total Federal Housing Administration and 

Veterans Administration home loans each year. Id.

Townstone has drawn few mortgage applications from African-American 

applicants throughout the Chicago MSA. FAC ¶ 43. From 2014 to 2017, for example, 

Townstone drew around 2,700 applicants, only 37 (1.4%) of which came from African 

Americans in the Chicago MSA. Id. During the same 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. 

Id. ¶ 44. Of Townstone’s five or six applications each year for properties in highAfrican-American neighborhoods (more than 80% African American), more than half 

each year were from non-Hispanic white applicants. Id.

Similarly, only 2.3%, 1.4%, 1.4%, and 2.2% of Townstone’s applications for the 

years 2014 through 2017, respectively, came from 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. FAC ¶ 45. While 

Townstone drew 2.3%, 1.4%, 1.4%, and 1.3% of its applications for properties in 

majority-African-American neighborhoods from 2014 through 2017, respectively, 

Townstone’s peers drew many times more—8.2%, 7.6%, 7.7%, and 8.1%. Id. ¶ 49.

IV. Procedural History

The CFPB filed suit against Defendants on July 15, 2020, R. 1, and amended 

its complaint on November 25, 2020, FAC. The three-count complaint alleges that: 

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(1) Townstone violated the ECOA, 15 U.S.C. § 1691(a), and its implementing 

regulation, Regulation B, 12 C.F.R. § 1002.4(b) (Count I); (2) Townstone violated the 

CFPA, 12 U.S.C. § 5536(a)(1)(A) (Count II); and (3) Sturner fraudulently transferred 

assets in violation of 28 U.S.C. §§ 3301–3308. FAC ¶¶ 53–78. Defendants have moved

to dismiss the FAC. Mot. Dismiss. Defendants subsequently filed a motion for leave 

to file a notice of supplemental authority regarding W. Virginia v. Env’t Prot. Agency, 

213 L. Ed. 2d 896, 142 S. Ct. 2587 (2022). R. 65; R. 67. The CFPB responded to 

Defendants’ notice of supplemental authority. R. 71.3 The Court subsequently held 

an in-person hearing on Defendants’ motion to dismiss the FAC. R. 74. 

Legal Standard

A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the 

complaint. Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 

820 (7th Cir. 2009). Under Rule 8(a)(2), a complaint must include only “a short and 

plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. 

Civ. P. 8(a)(2). To survive a motion to dismiss, a complaint need only contain factual 

allegations, accepted as true, sufficient to “state a claim to relief that is plausible on 

its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 

550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads 

3In West Virginia, the Supreme Court held that the Environmental Protection Agency (EPA)

did not have authority to adopt the regulation at issue because it raised a “major question” 

of ”economic and political significance” as to which Congress had not clearly delegated 

authority to the EPA. 142 S. Ct. at 2613. The Court has considered Defendants’ arguments 

as to the applicability of West Virginia to this case, R. 67, and the CFPB’s response, R. 71, 

and agrees with the CFPB that the major-questions doctrine is unimportant to the issue 

presented here. 

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factual content that allows the court to draw the reasonable inference that the 

defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing 

Twombly, 550 U.S. at 556). The allegations “must be enough to raise a right to relief 

above the speculative level.” Twombly, 550 U.S. at 555. The allegations that are 

entitled to the assumption of truth are those that are factual, rather than mere legal 

conclusions. Iqbal, 556 U.S. at 678–79.

Analysis

I. The ECOA and Regulation B (Count I)

The CFPB alleges that Townstone’s acts and practices would discourage 

African-American prospective applicants, as well as prospective applicants in 

majority- and high-African-American neighborhoods in the Chicago MSA from 

seeking credit, in violation of Regulation B and the ECOA. FAC ¶¶ 54–55. 

The ECOA provides, in relevant part, that “[i]t shall be unlawful for any 

creditor to discriminate against any applicant, with respect to any aspect of a credit 

transaction—on the basis of race, color, religion, national origin, sex or marital 

status, or age (provided the applicant has the capacity to contract) . . . .” 15 U.S.C. 

§ 1691(a). The ECOA was a landmark civil rights law enacted in 1974 to protect 

individuals and businesses against discrimination in accessing and using credit, “a 

virtual necessity of life” for most Americans. S. Rep. No. 94-589, at 3–4 (1976); see 

also Treadway v. Gateway Chevrolet Oldsmobile Inc., 362 F.3d 971, 975 (7th Cir. 

2004) (the ECOA enacted to prohibit discrimination in credit transactions). 

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In Section 1691b of the ECOA, Congress directed, first the Federal Reserve 

Board, and then the CFPB,4 to make regulations to carry out the purposes of the 

ECOA:

The Bureau shall prescribe regulations to carry out the purposes of this 

subchapter. These regulations may contain but are not limited to such 

classifications, differentiation, or other provision, and may provide for such 

adjustments and exceptions for any class of transactions, as in the judgment 

of the Bureau are necessary or proper to effectuate the purposes of this 

subchapter, to prevent circumvention or evasion thereof, or to facilitate or 

substantiate compliance therewith.

15 U.S.C. § 1691b(a). 

The resulting regulations enacted in 1975, known collectively as Regulation B, 

provide in pertinent part: 

Discouragement. A creditor shall not make any oral or written statement, in 

advertising or otherwise, to applicants or prospective applicants that would 

discourage on a prohibited basis a reasonable person from making or pursuing 

an application.

12 C.F.R. § 1002.4(b). 

Defendants move to dismiss Count I based on Regulation B and the ECOA, 

arguing that the CFPB improperly attempts to expand the ECOA’s reach beyond the 

express and unambiguous language of the statute. R. 32, Memo. Dismiss at 5 (citing 

Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842–

43 (1984)). Specifically, Defendants argue that while the ECOA regulates behavior 

towards applicants for credit, it does not regulate any behavior relating to prospective 

4In 2010, Congress transferred the Federal Reserve Board’s rulemaking authority to the 

CFPB. Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 

124 Stat. 1376, 2083–84 (2010); see Regions Bank v. Legal Outsource PA, 936 F.3d 1184, 1208 

n.9 (11th Cir. 2019). 

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applicants who have not yet applied for credit. Memo Dismiss at 4. The CFPB 

responds that Regulation B’s longstanding discouragement prohibition is authorized 

by and necessary to the ECOA, and that courts have consistently recognized 

Regulation B’s discouragement prohibition, even when applied to prospective 

applicants. R. 35, Resp. at 8–10 (citing Alexander v. AmeriPro Funding, Inc., 848 F.3d 

698 (5th Cir. 2017); Dhade v. Huntington Learning Centers, Inc., 414 F. Supp. 3d 703 

(D. Del. 2019); Page v. Midland Fed. Sav. & Loan Ass’n, 2013 WL 5211747, at *5 

(N.D. Ill. Sept. 13, 2013)).

The parties’ arguments present the question of whether the agency’s 

interpretation of the ECOA in Regulation B is one that the ECOA permits. The Court

approaches that inquiry, as it must, “through the two-step framework set forth in 

Chevron[.]” Cook Cnty., Illinois v. Wolf, 962 F.3d 208, 221 (7th Cir. 2020) (citing 

Chevron, 467 U.S. 837). The first step of Chevron is to determine “whether Congress 

has directly spoken to the precise question at issue.” Id. (internal quotation marks 

omitted). If Congress has spoken to the precise question at issue “unambiguously,” 

then “that is the end of it: the agency and courts alike are bound by what Congress 

wrote.” Id. However, if Congress has “not spoken clearly,” the court moves on to step 

two, in which the court “consider[s] whether the agency’s interpretation reflects a 

permissible construction of the statute.” Id. 

A. Chevron Step One

Turning to step one of Chevron, as stated above, the Court looks to the text of 

the ECOA to determine “whether Congress has directly spoken to the precise question 

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at issue,” Wolf, 962 F.3d at 221, namely, whether the ECOA prohibits discouragement 

of prospective applicants on the basis of race. “Statutory construction must begin with 

the language employed by Congress and the assumption that the ordinary meaning 

of that language accurately expresses the legislative purpose.” Turley v. Gaetz, 625 

F.3d 1005, 1008 (7th Cir. 2010) (quoting Park ’N Fly, Inc. v. Dollar Park & Fly, Inc., 

469 U.S. 189, 194 (1985)) (internal quotation marks omitted). “Statutory 

interpretation is guided not just by a single sentence or sentence fragment, but by 

the language of the whole law, and its object and policy.” Commodity Futures Trading 

Comm’n v. Worth Bullion Grp., Inc., 717 F.3d 545, 550 (7th Cir. 2013) (internal 

quotation marks and citation omitted). “Indeed, statutory interpretation is a holistic 

endeavor and, at a minimum, must account for the statute’s full text, language as 

well as punctuation, structure, and subject matter.” Trs. of Chi. Truck Drivers, 

Helpers & Warehouse Workers Union (Indep.) Pension Fund v. Leaseway Transp. 

Corp., 76 F.3d 824, 828 (7th Cir. 1996) (internal quotation marks and citation 

omitted); see also Estate of Moreland v. Dieter, 576 F.3d 691, 699 (7th Cir. 2009).

The ECOA states that “[i]t shall be unlawful for any creditor to discriminate 

against any applicant, with respect to any aspect of a credit transaction—on the basis 

of race, color, religion, national origin, sex or marital status, or age (provided the 

applicant has the capacity to contract) . . . .” 15 U.S.C. § 1691(a) (emphases added). 

The ECOA further defines “applicant” to mean “any person who applies to a creditor 

directly for an extension, renewal, or continuation of credit, or applies to a creditor 

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indirectly by use of an existing credit plan for an amount exceeding a previously 

established credit limit.” Id. § 1691a(b). 

The plain text of the ECOA thus clearly and unambiguously prohibits 

discrimination against applicants, which the ECOA clearly and unambiguously 

defines as a person who applies to a creditor for credit. 15 U.S.C. §§ 1691(a), 1691a(b).

The Court therefore finds that Congress has directly and unambiguously spoken on 

the issue at hand and only prohibits discrimination against applicants. As such, “that 

is the end of it,” Wolf, 962 F.3d at 221, and the Court need not move on to the second 

step of the Chevron analysis because it is clear that the ECOA does not apply to 

prospective applicants.5 The Court consequently affords no deference to 12 C.F.R. 

§ 1002.4. See, e.g., Zimmerman v. Oregon Dep’t of Just., 170 F.3d 1169, 1173 (9th Cir. 

1999) (affording no weight to 28 C.F.R. § 35.140(a), having found that “Congress 

unambiguously expressed its intent for Title II not to apply to employment”); 

Patterson v. Illinois, Dep’t of Corr., 35 F. Supp. 2d 1103, 1108 (C.D. Ill. 1999) (same).

Case law supports the Court’s interpretation of the ECOA. The Seventh Circuit 

similarly found the ECOA’s definition of “applicant” to be unambiguous in Moran 

Foods, Inc. v. Mid-Atlantic Market Development Co., LLC, 476 F.3d 436, 441 (7th Cir. 

2007), a case cited by Defendants. There, Susan Camp, a party who had guaranteed 

her husband’s debt, brought a counterclaim alleging that a grocery store had violated 

5Because the Court finds that the ECOA unambiguously applies to “applicants” and not 

“prospective applicants,” the Court does not analyze whether the ECOA’s prohibition on 

“discrimination” encompasses “discouragement.” The Court likewise does not reach 

Defendants’ argument that the CFBP is attempting to create affirmative obligations with 

respect to marketing and the hiring of loan officers, nor its arguments under the First and 

Fifth Amendments. Memo. Dismiss at 8–9, 12–23. 

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the ECOA by discriminating against her based on her marital status. Id. at 437.

Camp obtained a jury verdict on her ECOA counterclaim. Id. On appeal, Camp asked 

to be awarded the attorney’s fees that she incurred in litigating her ECOA case and 

pursued additional relief under the ECOA. Id. at 437–38. 

In assessing Camp’s ECOA claim, the Seventh Circuit initially concluded that 

she was not an applicant at all: “Susan Camp was not an applicant for credit, and 

neither received credit nor was denied it. Instead, she guaranteed her husband’s debt 

and by doing so enabled his company to buy groceries from Moran on credit.” Moran, 

476 F.3d at 441. The court recognized, however, that the Federal Reserve Board had 

“defined ‘applicant’ for credit (the term in the statute) to include a guarantor.” Id.

(citing 12 C.F.R. §§ 202.2(e), 202.7(d)). While the Seventh Circuit acknowledged that 

“courts defer to administrative interpretations of statutes when a statute is 

ambiguous,” the court found that “there is nothing ambiguous about ‘ applicant’ and 

no way to confuse an applicant with a guarantor.” Id. (citations omitted). The court 

in Moran elaborated that “to interpret ‘applicant’ as embracing ‘guarantor’ opens 

vistas of liability that the Congress that enacted the Act would have been unlikely to 

accept.” Id.6 So too here, the Court doubts that the ECOA can be “stretched far 

6Ultimately, the court in Moran found that even if the Federal Reserve Board’s interpretation 

were authorized, Camp’s ECOA claim “must lose because she failed to prove discrimination.” 

476 F.3d at 441. The court therefore reversed the judgment of the district court. Id. at 442. 

As a result, the Seventh Circuit’s ECOA discussion in Moran is non-binding dicta. See 

FirstMerit Bank, N.A. v. Ferrari, 71 F. Supp. 3d 751, 758–59 (N.D. Ill. 2014). Even so, the 

analysis provides a straightforward interpretation of the ECOA, which the Court finds 

persuasive. 

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enough” to interpret a prohibition of discrimination against applicants as prohibiting 

discrimination of prospective applicants. Id. 

Defendants direct the Court to other Court of Appeals decisions as well, which 

hold that an “applicant” does not encompass a “guarantor” under the ECOA. Memo. 

Dismiss at 7 (citing Hawkins v. Cmty. Bank of Raymore, 761 F.3d 937, 942 (8th Cir. 

2014); Regions Bank v. Legal Outsource PA, 936 F.3d 1184, 1193 (11th Cir. 2019)). 

Both decisions buttress this Court’s finding that no deference is owed to Regulation 

B’s anti-discouragement provision for prospective applicants. 

In Hawkins, for example, the plaintiffs, guarantors, brought an ECOA claim 

alleging that the defendant bank discriminated against them based on their marital 

status. 761 F.3d at 939. The district court granted summary judgment against the 

plaintiffs, holding that they did not constitute “applicants” under the ECOA. Id. at 

940. On appeal, the plaintiffs insisted they could bring a claim under the ECOA 

because 12 C.F.R. § 202.2(e) of Regulation B provided that the definition of 

“applicant” included a guarantor. Id. Observing that the case turned on whether the 

court should defer to Regulation B Section 202.3(e)’s definition of “applicant,” which 

would allow the plaintiffs’ suit, the court applied the Chevron two-step framework. 

Id. At step one, the Eighth Circuit found that the “text of the ECOA clearly provides 

that a person does not qualify as an applicant under the statute solely by virtue of 

executing a guaranty to secure the debt of another.” Id. at 941. The court looked to 

the ECOA’s definition of “applicant,” reviewed the dictionary definition for “apply,” 

and concluded that “the plain language of the ECOA unmistakably provides that a 

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person is an applicant only if she requests credit.” Id. (citing 15 U.S.C. § 1691a(b); 

Webster’s Third New International Dictionary 105 (2002)). “Because the text of the 

ECOA is unambiguous regarding whether a guarantor constitutes an applicant,” the 

Eight Circuit stopped after Chevron step one and did not defer to the agency’s 

interpretation of applicant. Id. at 942. 

In Regions Bank, defendants who had been sued for breach of promissory notes 

and breach of guaranties brought counterclaims alleging they were discriminated 

against on the basis of marital status in violation of the ECOA. 936 F.3d at 1187. 

After losing on summary judgment, the defendants appealed, relying on the definition 

of “applicant” in Regulation B to argue that they could bring their ECOA 

counterclaims. Id. at 1190. The Eleventh Circuit, like the Eighth, applied the twostep Chevron framework to determine whether it owed deference to Regulation B’s 

interpretation of “applicant.” Id. Because the court “agree[d] with the Seventh and 

Eighth Circuits that the ordinary meaning of ‘applicant’ does not encompass a 

guarantor,” the Eleventh Circuit concluded that no deference was due Section 

202.2(e). Id. at 1193 (citing Moran, 476 F.3d at 441; Hawkins, 761 F.3d at 942). But 

see RL BB Acquisition, LLC v. Bridgemill Commons Dev. Grp., LLC, 754 F.3d 380, 

385 (6th Cir. 2014) (proceeding to Chevron step two and deferring to section 202.2(e) 

on theory that the term “applies” is ambiguous and that guarantors qualify as 

requesting credit because they “make formal requests for aid in the form of credit for 

a third party”).

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The CFPB attempts to distinguish Defendants’ authority by arguing that the

cases are inapposite because they analyze whether a “guarantor” is within the 

definition of “applicant” for purposes of bringing a private action under the ECOA. 

Resp. at 8–9. The CFPB posits that neither the definition of “applicant,” nor the 

question of whether a private right of action exists, is at issue in this case. Id. at 9.

True, the cases cited by Defendants involved the question of whether individual 

guarantors could maintain an action under the ECOA. But the analysis employed by 

the courts to resolve the issue in those cases provides a sound framework to resolve 

the issue in this case. 

The CFPB argues that it has more expansive enforcement powers than the 

private right of action, and moreover, its authority to prohibit discouragement of 

“prospective applicants” does not require stretching the term “applicant” to 

encompass “prospective applicants.” Id. The Court disagrees. 

The CFPB’s authority to enact regulations is not limitless. Under Section 

1691b, the CFPB “shall prescribe regulations to carry out the purposes of [the 

ECOA].” 15 U.S.C. § 1691b(a). While the delegating section is, no doubt, broad,7 the 

ECOA explicitly defines its “Scope of prohibition” as: “[i]t shall be unlawful for any 

creditor to discriminate against any applicant, with respect to any aspect of a credit 

transaction—on the basis of race[.]” Id. § 1691(a) (emphasis added). Indeed, the entire 

statutory scheme revolves around applicants. As Defendants point out, the word 

7The CFPB, relying on the Mourning test, argues that the broad language in Section 1691b 

means that it can enact any regulations “reasonably related” to the purposes of the ECOA. 

Resp. at 6–7. As discussed further below, the CFPB cannot use the Mourning test to avoid 

the two-step Chevron framework. See infra Section I.B.

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“applicant” is used twenty-six times in the statute, and the statute does not prohibit 

or discuss conduct prior to the filing of an application. See Memo. Dismiss at 4. So, 

contrary to the CFPB’s position, the statute’s expression of “applicant,” is essential to 

understanding whether the CFPB can regulate with respect to “prospective 

applicants.” The CFPB cannot regulate outside the bounds of the ECOA, and the 

ECOA clearly marks its boundary with the term “applicant.” 

The Court’s reading of the ECOA, moreover, is not limited to the civil liability 

section of the ECOA, which provides that “[a]ny creditor who fails to comply with any 

requirement imposed under this subchapter shall be liable to the aggrieved applicant 

for any actual damages sustained by such applicant acting either in an individual 

capacity or as a member of a class.” 15 U.S.C. § 1691e(a).8 That is, the Court is not 

looking exclusively at the private right of action section of the ECOA to conclude that 

the whole act applies only to those who qualify as proper plaintiffs under that section. 

While this case may not present the specific issue of whether a private right of action 

exists for a private prospective applicant under Section 1691e, Count I, nevertheless,

8By contrast, the holding in one of the cases relied on by the CFPB, Alexander v. AmeriPro 

Funding, Inc., 848 F.3d 698 (5th Cir. 2017), was limited to the court’s interpretation of the 

civil liability section, Section 1691e. There, the court found, without applying the Chevron 

framework, that “[d]iscouragement of a ‘prospective applicant’ may be regulatorily 

prohibited, but it cannot form the basis of a private claim or cause of action under the ECOA.” 

Id. at 708. The Court finds Alexander of limited utility because the court did not address 

whether the court should defer to Regulation B under the two-step Chevron framework. 

Similarly, in Dhade, 414 F. Supp. 3d at 707, another case relied on by the CFPB limited to a 

claim brought under the civil liability section, the court found that Regulation B did not 

expand the definition of “applicant” to include “prospective applicant” in Section 1691e. 

Although the court noted that “the ECOA vested the CFPB with enforcement powers that 

are more expansive than the private right of action,” it also applied Chevron step one to find 

that “[t]here is nothing ambiguous about ‘applicant,’” meaning the court should not defer to 

an agency’s interpretation of the statute. Id. at 706–07. 

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cannot stand if it is based on a portion of Regulation B to which the Court owes no 

deference. Put another way, the ECOA says nothing about “prospective applicants,” 

so if the Court does not defer to Regulation B, Count I fails to state a claim, regardless 

of Section 1691e. C.f. Dhade, 414 F. Supp. 3d at 707.

To further rebut Defendants’ authority, the CFPB cites to cases which 

purportedly acknowledge and treat Regulation B’s discouragement of prospective 

applicants as presumptively valid. Resp. at 9–10 (citing Treadway, 362 F.3d at 979–

80; Harbaugh v. Cont’l Ill. Nat’l Bank & Tr. Co. of Chi., 615 F.2d 1169, 1174 (7th Cir. 

1980)). Yet, a court’s acknowledgment of—or even reliance on—a regulation, when 

the validity of that regulation is not dispute, does not help the Court resolve the 

Chevron deference question at play here. The CFPB points to Page, 2013 WL 

5211747, at *5, in which the court rejected Defendant’s argument that the individual 

plaintiff’s claim under the civil liability provision failed because she never submitted 

an application. The court looked to Regulation B’s language and found that “the 

ECOA applies to all stages of a credit transaction.” Id. However, the court did not 

engage in the two-step Chevron analysis to determine whether the court should defer 

to Regulation B. Id. After applying the Chevron analysis, the Court respectfully 

disagrees with the court’s deference to Regulation B in Page. The CFPB cites to no 

authority in which a court engaged in a Chevron analysis and after doing so, deferred

to the anti-discouragement provision in Regulation B. For the reasons stated above, 

the Court finds that, when applying step one of Chevron, it cannot defer to Regulation 

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B’s anti-discouragement provision of with respect to “prospective applicants,” no 

matter how desirable it might be to do so as a policy matter. 

B. The CFPB’s Reliance on the Mourning Standard

Rather than engage in any Chevron analysis, the CFPB attempts to skirt the 

Chevron framework by emphasizing the broad language of the delegation provision 

of the ECOA, Section 1691b. Resp. at 6 (citing 15 U.S.C. § 1691b(a)). According to the 

CFPB, “Congress understood that additional rules may be necessary to prevent 

evasion of [the] ECOA’s prohibitions and expressly instructed the Board, then the 

[CFPB], to enact any such rules.” Id. The CFBP essentially suggests that Congress 

gave the CFPB rulemaking carte blanche in Section 1691b. In support, the CFPB 

directs the Court to a similar “anti-evasion provision” in the Truth in Lending Act 

(TILA), 15 U.S.C. § 1604(a)), as well as a pre-Chevron case interpreting the TILA, 

Mourning v. Fam. Publ’ns Serv., Inc., 411 U.S. 356 (1973). Id. at 6–7. 

In Mourning, the Supreme Court addressed whether the Federal Reserve 

Board had exceeded its authority under the TILA in promulgating a portion of its 

Regulation Z, commonly referred to as the “Four Installment Rule.” 411 U.S. at 358. 

Section 121 of the TILA required merchants who regularly extend credit with 

attendant finance charges to disclose certain contract information. 15 U.S.C. § 1631. 

The Federal Reserve Board promulgated Regulation Z, which required disclosure 

under Section 121 of the TILA whenever credit is offered to a consumer “for which 

either a finance charge is or may be imposed or which pursuant to an agreement, is 

or may be payable in more than four installments.” 411 U.S. at 362 (citing 12 CFR 

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§ 226.2(k)). To determine whether the Federal Reserve Board had exceeded its 

rulemaking authority, the Supreme Court looked to the delegation provision of the 

TILA, Section 105, which provided that the Federal Reserve Board “shall prescribe 

regulations to carry out the purposes of (the Act). These regulations may contain such 

classifications, differentiations, or other provisions, and may provide for such 

adjustments and exceptions for any class of transactions, as in the judgment of the 

Board are necessary or proper to effectuate the purposes of (the Act), to prevent 

circumvention or evasion thereof, or to facilitate compliance therewith.” 15 U.S.C. 

§ 1604.

From this language, the Supreme Court found that Congress gave the Federal 

Reserve Board “broad authority to promulgate regulations necessary to render the 

Act effective.” 411 U.S. at 365. Specifically, the Court in Mourning highlighted both 

the general grant of authority to promulgate regulations designed to carry out the 

purposes of the act, as well as the language in Section 105 allowing regulations that 

may define classifications and exceptions to ensure compliance with the TILA. Id.

Under the applicable precedent at the time, where an empowering provision of a 

statute, like Section 105, gave the agency the power to make such rules and 

regulations as may be necessary to carry out the act, the validity of a regulation 

promulgated under such an empowering provision would be sustained, so long as it 

was “reasonably related to the purposes of the enabling legislation.” 411 U.S. at 369

(internal quotation marks and citations omitted). The Supreme Court therefore 

upheld the “Four Installment Rule” because the rule was reasonably related to the 

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TILA’s objectives of preventing the evasion of its reporting requirements by 

concealing credit charges. Id. at 371. 

The CFPB submits that, per the Mourning decision, the anti-discouragement 

provision of Regulation B must be sustained, so long as it is reasonably related to the 

ECOA’s objectives. Resp. at 7. The Seventh Circuit, contends the CFPB, “has likewise 

held that rules necessary to render TILA effective must be sustained so long as they 

are reasonably related to the legislation’s purposes.” Id. (citing Muro v. Target Corp., 

580 F.3d 485, 494 n.9 (7th Cir. 2009)). However, neither Mourning nor Muro permits 

this Court to dodge the two-step Chevron framework. 

First and foremost, the Supreme Court mandates that a court faced with a 

disputed agency interpretation must apply Chevron. In City of Arlington, Tex. v. 

F.C.C., for example, the Supreme Court rejected using a non-Chevron standard when 

an agency interprets the scope of its own statutory authority. 569 U.S. 290, 296–97 

(2013). The Supreme Court held that the Chevron framework applied, reasoning that 

“[n]o matter how it is framed, the question a court faces when confronted with an 

agency’s interpretation of a statute it administers is always, simply, whether the 

agency has stayed within the bounds of its statutory authority.” Id. at 297 (emphasis 

in original). And in an earlier, post-Mourning case analyzing the TILA, the Supreme 

Court approached a regulation, not by asking whether the Federal Reserve Board’s 

interpretation was reasonably related to TILA’s objectives (the Mourning test), but 

by asking whether the statute had spoken on the issue (Chevron step one): “In 

determining whether the Board was empowered to make such a change, we begin, of 

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course, with the language of the statute. If the statute is clear and unambiguous ‘that 

is the end of the matter, for the court, as well as the agency, must give effect to the 

unambiguously expressed intent of Congress.’” Bd. of Governors of Fed. Rsrv. Sys. v. 

Dimension Fin. Corp., 474 U.S. 361, 368 (1986) (citing Chevron, 467 U.S. at 842–43); 

see also Ragsdale v. Wolverine World Wide, Inc., 535 U.S. 81, 92 (2002) (explaining 

that Mourning does not authorize agencies to “contravene Congress’ will”).

Seventh Circuit decisions, too, plainly require the Court to apply the Chevron 

framework when faced with a disputed agency interpretation that merits Chevron 

deference.9 See, e.g., Zaragoza v. Garland, 52 F.4th 1006, 1019 (7th Cir. 2022) 

(applying two-step Chevron framework to decision of Attorney General interpreting 

federal immigration statutes); Wolf, 962 F.3d at 221 (“The overriding question is 

whether the agency’s interpretation of the relevant statute is one the text will permit. 

We approach this inquiry through the two-step framework set forth in Chevron[.]”); 

Khan v. United States, 548 F.3d 549, 554 (7th Cir. 2008), as amended (Dec. 4, 2008) 

(reviewing general authority regulations under the two-step Chevron framework). 

Because the Chevron framework reigns supreme, numerous courts have 

rejected similar agency attempts to eschew Chevron in favor of Mourning. For 

instance, Defendants point to First Premier Bank v. U.S. Consumer Fin. Prot. Bureau, 

9An agency interpretation qualifies for Chevron step one when “it appears that Congress 

delegated authority to the agency generally to make rules carrying the force of law, and that 

the agency interpretation claiming deference was promulgated in the exercise of that 

authority.” United States v. Mead Corp., 533 U.S. 218, 226–27 (2001); see also Brumfield v. 

City of Chicago, 735 F.3d 619, 625–26 (7th Cir. 2013). This threshold question, sometimes 

referred to as “Chevron step zero,” see, e.g., Pugin v. Garland, 19 F.4th 437, 441 (4th Cir. 

2021), is not disputed in this case.

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819 F. Supp. 2d 906, 909 (D.S.D. 2011). R. 38, Reply at 2–3. In First Premier Bank, a 

bank sued the CFPB, seeking a preliminary injunction to postpone and enjoin the 

effective date of an amendment to a credit card fee regulation. 819 F. Supp. 2d at 909. 

The bank attacked the regulation amendment under the Administrative Procedure 

Act. Id. at 911–12. In analyzing the disputed regulation amendment, the court 

applied the two-step Chevron framework. Id. at 914. The CFPB argued that the 

Chevron framework did not apply, citing Mourning and two other pre-Chevron cases. 

Id. at 917 (citing Anderson Bros. Ford v. Valencia, 452 U.S. 205 (1981); Ford Motor 

Credit Co. v. Milhollin, 444 U.S. 555 (1980); Mourning, 411 U.S. 356). The court 

rejected the CFPB’s contention, stating “the language of Mourning and its progeny 

make sense standing alone only in a pre-Chevron setting” in which “‘pre-Chevron

courts frequently looked to the relative competence of the agency and the court in 

deciding the matter in question.’” Id. at 917–18 (quoting Oil, Chem. & Atomic Workers 

Int'l Union, AFL-CIO v. N.L.R.B., 46 F.3d 82, 90 (D.C. Cir. 1995)). 

Similarly in Colorado River Indian Tribes v. Nat’l Indian Gaming Comm’n, the 

National Indian Gaming Commission argued that its minimum internal control 

standards for a casino should be sustained under Mourning, as the rules were 

“reasonably related to the statutory purposes of the [Indian Gaming Regulatory Act].”

383 F. Supp. 2d 123, 143 (D.D.C. 2005), aff’d, 466 F.3d 134 (D.C. Cir. 2006). The court 

disagreed, explaining that “courts and agencies ‘are bound, not only by the ultimate 

purposes Congress has selected but by the means it has deemed appropriate, and 

prescribed, for the pursuit of those purposes.’” Id. (quoting MCI Telecommunications 

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Corp. v. Am. Tel. & Tel. Co., 512 U.S. 218, 231 n.4 (1994)). The court concluded that 

“although Mourning stated that a broad grant of rule-making authority allows an 

agency to issue regulations that are ‘reasonably related to the purposes of the 

enabling legislation,’ courts have consistently read this language to describe a 

heightened level of deference that is due the agency’s interpretation of an ambiguous 

statute under Chevron step two, rather than a warrant to override a clear statute 

under Chevron step one.” Id. at 144 & n.15 (emphasis added) (collecting cases). 

The Court joins First Premier Bank and Colorado River Indian Tribes in 

declining the agency’s invitation to bypass Chevron by way of Mourning. The Court 

further sides with the numerous courts who have held that Mourning’s application 

belongs, if anywhere, in Chevron step two. See, e.g., Merck & Co. v. United States 

Dep't of Health & Hum. Servs., 385 F. Supp. 3d 81, 88–89 (D.D.C. 2019), aff’d, 962 

F.3d 531 (D.C. Cir. 2020) (rejecting agency’s attempt to circumvent Chevron in light 

of Mourning and collecting cases situating Mourning with Chevron’s second step); 

Chamber of Com. of U.S. v. N.L.R.B., 721 F.3d 152, 161 (4th Cir. 2013) (holding 

Mourning analysis only relevant once the court has determined that a statute is 

ambiguous, concluding “Mourning’s exhortation that we ‘defer to the informed 

experience and judgment of the agency to whom Congress delegated appropriate 

authority,’ . . . cannot be read as requiring [the court] to defer to the agency’s 

interpretation as [the court] conduct[s its] initial analysis of the Act.”); Brackeen v. 

Haaland, 994 F.3d 249, 360 (5th Cir. 2021) (applying Mourning test in second step of 

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Chevron). Here, because the ECOA is unambiguous, the Court does not reach 

Chevron step two,10 and Mourning is inapplicable. 

The Seventh Circuit’s Muro decision does not revive Mourning’s significance 

either. In Muro, the Seventh Circuit reviewed a district court’s denial of class 

certification in an attempted TILA class action. 580 F.3d at 487. When interpreting 

Section 1637(a) of TILA, the court found that TILA was silent on “when an account 

is ‘open.’” Id. at 493. Having found a gap in the statute, the court looked to Regulation 

Z’s specification that initial disclosures must be made before the first transaction is 

made under the plan. Id. (citing 12 C.F.R. § 226.5(b)(1)). Dropping a footnote, the 

Seventh Circuit cited Mourning generally for the proposition that “[t]he provisions of 

Regulation Z are afforded substantial weight.” Id. at 493 n.9. So, although the court 

in Muro cited Mourning, Regulation Z was not under review, and even if it were, the 

court only looked to Mourning after the court had determined that Congress had been 

silent on the issue the court was concerned with. Muro in no way stands for the 

proposition that a court can avoid the Chevron framework in light of Mourning. 

In sum, the Chevron framework requires the Court to begin its analysis with 

the plain language of the ECOA. Because the Court finds the ECOA unambiguously 

prohibits discrimination of “applicants,” and not “prospective applicants,” the Court 

does not assess Regulation B for the soundness of its policy, the need for it in the 

10Because the Court does not reach Chevron step two, the CFPB’s arguments about legislative 

history and the ineffectiveness of the ECOA without Regulation B’s anti-discouragement 

provision, see Resp. at 4–5, 7–8, are inapposite. Coyomani-Cielo v. Holder, 758 F.3d 908, 914 

(7th Cir. 2014) (holding legislative history is reserved for Chevron’s second step, in which 

court deferentially determines whether the agency’s interpretation is reasonable). 

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statute, or even whether it is reasonably related to the ECOA’s objectives. To be clear, 

the Court appreciates the expertise of the CFPB in implementing the ECOA and 

commends its attempts to prevent the deplorable practice of discouraging people, on 

the basis of race, from applying for credit. The practice of limiting credit to individuals 

based on criteria other than creditworthiness is as odious as it is offensive. However, 

the Court is duty-bound to follow precedent, which means the Court can only defer to 

an agency’s interpretation of a statute, no matter how laudable its purpose, when it 

survives the two-step Chevron framework. The anti-discouragement provision of 

Regulation B with respect to “prospective applicants” does not survive Chevron step 

one, so the Court does not defer to the CFPB’s interpretation. 

Accordingly, the CFPB’s ECOA count is dismissed. The dismissal is with 

prejudice because any amendment would be futile. See Heng v. Heavner, Beyers & 

Mihlar, LLC, 849 F.3d 348, 354 (7th Cir. 2017). The CFPB cannot amend its pleading 

in a way that would change the language of the ECOA. Counts II and III, which are 

dependent on the CFPB’s ECOA claim, see FAC ¶¶ 59–78, are likewise dismissed 

with prejudice. 

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Conclusion 

For the foregoing reasons, the Court grants Defendants’ motion to dismiss the 

FAC [31] and dismisses the FAC with prejudice. Civil case terminated. 

Dated: February 3, 2023 

____________________________________ 

United States District Judge

Franklin U. Valderrama

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