Tiny Entrepreneur dares to speak up about Chicago’s crime – What happened next will shock you!

The Consumer Financial Protection Bureau in 2017 began investigating Townstone Financial, a small mortgage company in Chicago, for possible violations of civil rights law.

The office prohibits lenders from making statements that “discourage” minorities from applying for loans. Townstone may have violated that regulation, the agency said, when its employees discussed crime in Chicago on a company-hosted radio program about the mortgage market, which also advertised Townstone’s services.

The offensive statements, drawn from five episodes taped over a three-year period, included a reference to Chicago’s South Side as a “war zone” as well as a recommendation that home sellers “remove the Confederate flag.” Just by mentioning the flag, the agency argumentcould scare off black applicants.

Facing a potential lawsuit and potentially severe penalties, Townstone in 2019 hired a consumer testing company, Kleimann Communication Group, to see if the comments actually alienated African-Americans.

The results were reassuring: Not a single black Chicagoan interviewed by the company found the radio segments offensive, according to a copy of the company report. report obtained by the Washington Free Beacon. Some even said they were more inclined to use Townstone for mortgages after hearing jokes from its employees, which they found funny and relatable.

But in July 2020, two months after George Floyd’s death, the office sued Townstone anyway.

What followed was an unprecedented legal battle between a small business with less than 10 employees and a powerful federal agency that claimed to know more than the consumers it was supposed to protect. Where working-class blacks listened to harmless chatter, agency officials heard derogatory dog ​​whistles, which their lawsuit claimed amounted to a “red line.”

Such claims are usually collected from the big banks with deep pockets. Townstone marked the first time the office, created in 2010 by Elizabeth Warren, had filed a red-line complaint against a non-bank mortgage lender, which would struggle to make multi-million dollar payments. typical of a settlement with the agency

It felt like “David and Goliath,” said Barry Sturner, Townstone president. And it was happening in a country that apparently prohibits the government from attacking citizens for their speech.

“They turned innocuous statements about crime into something infamous and then tried to use them to ruin my reputation and destroy my business,” Sturner said. “When a federal agency with an unlimited budget and an army of lawyers go after your business and smear you as a racist, you are forced to either give in and accept it or choose an uphill fight.”

Three years later, Sturner is still fighting. Although a district court dismissed the lawsuit in February, the office is now appealing that decision to the Seventh Circuit Court of Appeals, which could catapult the case to the Supreme Court.

While the odds are stacked against the agency in both places (the Seventh Circuit, like the Superior Court, is majority conservative), the persistence illustrates how government bureaucrats, armed with a civil rights mandate, can intimidate and bankrupt corporations over constitutionally protected speech. .

Legal fees alone often run into the hundreds of thousands of dollars in a case like Townstone’s, said Jessica Thompson, an attorney with the Pacific Legal Foundation, which represented Sturner pro bono. Add in the possibility of damages, and it’s often safer to settle, a dynamic that allows the government to cool down the rhetoric simply by opening an investigation and dangling the possibility of a lawsuit.

The result, Thompson said, is a system ripe for constitutional abuse.

“Speech restrictions based on content or point of view are antithetical to the First Amendment,” he told the free beacon. “That means it is unconstitutional for agency bureaucrats to appoint themselves speech police to censor discussion of public issues just because it might be offensive to some.”

At least some of that censorship appears to have been due to the cultural distance between downtown Chicago and northwestern Washington, DC.

On a 2017 episode of Townstone’s radio show, Sturner referred to a Chicago South Side grocery store, Jewel-Osco, as “Jungle Jewel,” adding that it was “a scary place” with customers “from everyone”. “

The agency cited the nickname as an example of language that would “discourage” minorities “from applying for credit.” In fact, the jungle moniker has been widely used by black Chicagoans themselves, one of whom told Kleimann Communication Group that Sturner’s comments were “reliable and helpful,” according to the firm’s report.

Other statements cited by the agency were forceful but repetitive. “You drive very fast through Markham,” Sturner said in a 2014 broadcast, referring to a majority-black Chicago suburb that experiences more crime than 95 percent of American cities. “You don’t look at anyone or fix your eyes on anyone.” In a November 2017 broadcast, a Townstone employee compared the “rush” of skydiving to “walking the South Side at 3 am.”

The agency also rebuked hosts for stating, in January 2014, that listeners should “lower the Confederate flag” before putting their homes on the market, guidance reflecting the official policy from the National Association of Realtors, which says displaying a Confederate flag may violate housing discrimination law.

“The Townstone Financial Show has regularly included statements that would discourage prospective African-American applicants from applying for home loans,” the lawsuit says. And his “home sales council has included recommendations regarding the display of the Confederate flag.”

The Consumer Financial Protection Bureau declined to comment.

It’s doubtful anyone complained to the agency about these statements, said Ted Frank, a well-known conservative lawyer who addresses regulatory overreach. Instead, agency officials likely noticed that Townstone made fewer loans in black neighborhoods than others and began to investigate.

Blacks accounted for just 1.4 percent of Townstone’s loan applications between 2014 and 2017, according to the agency’s complaint, and less than 1 percent of its loans were for properties in predominantly black neighborhoods, which comprise about 14 percent of Chicago’s population.

Although such disparities are not illegal in and of themselves (lenders may consider race-blind factors, such as credit scores, which vary on average across racial groups), they can be evidence of discrimination and the catalyst for a lawsuit. The result, Frank said, is a “racial loot system” in which quotas, while not officially required, are effectively enforced.

“If you don’t have proportional representation among loan recipients, agencies will look for disparate impact and go after it,” Frank said. “It is problematic to see Kendism,” a reference to “anti-racist” activist Ibram X. Kendi, who argues that all racial disparities reflect racism, “be the official policy of the United States government.”

Something like that policy has now been written in the Consumer Financial Protection Bureau. operations manual. the bureau said last year that would sue lenders for disparate impact “regardless of whether it is intentional,” something Congress never authorized to do

It was the latest move by an agency that has long taken an expansive view of its mandate, sometimes interpreting the laws to cover far more conduct than their plain text implies.

Townstone’s litigation centers on the Equal Credit Opportunity Act, which makes it illegal to “discriminate against any applicant” for credit on the basis of race. The agency has interpreted the law to include “potential applicants” in addition to actual ones, a potentially massive category. It relied on this inflated interpretation to go after Townstone, arguing that the lender could be guilty of discrimination even if it had not discriminated against anyone who applied for credit.

The argument was so bold that Franklin U. Valderrama, the district court judge presiding over the case, did not address First Amendment issues in his opinion. He dismissed the lawsuit simply on separation of powers grounds, saying the bureau, an agency of the executive branch, had ignored the clear meaning of a law enacted by Congress. For now, it remains an open legal question whether lenders can speak candidly about crime.

The appeal to the Seventh Circuit comes as the entire funding structure of the office is under review in the Supreme Court. The existential stakes in that case have sparked a debate about how the agency should be reformed and what it is for.

in a congress audience In March, Rep. Ayanna Pressley (D., Mass.) responded to the second question by pointing to Townstone.

“I for one am glad the agency has cracked down on discriminatory lending practices,” Pressley told the House Financial Services Committee, citing the company’s “racist messages.” “We need more, not less, of the CFBP.”

Ryan Nevin contributed to this report.

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