On June 12, 2025, Judge Valderrama of the federal district court for the Northern District of Illinois denied the joint motion to vacate the stipulated final judgment reached between the Consumer Financial Protection Bureau (“CFPB”) and Townstone Financial, Inc., in an action alleging violations of the Equal Credit Opportunity Act (“ECOA”).
As explained in Mayer Brown’s Consumer Financial Services Review blog, the CFPB sought to vacate the settlement, in which Townstone agreed to pay a small penalty and take certain actions to resolve a years-long battle related to alleged discouragement of potential mortgage applicants on a prohibited basis. The settlement was entered in November 2024. However, the CFPB’s new leadership asserted that although the lawsuit was launched during President Trump’s first administration, it did so without substantial evidence of discrimination and based on the expressed political views of the mortgage company’s principal. The CFPB’s motion to vacate claims that CFPB lawyers at the time misled their superiors, leading them to pursue the litigation based on incomplete or inaccurate information.
Interestingly, Judge Valderrama wrote the opinion that initially dismissed the CFPB’s case against Townstone in 2023, holding that ECOA does not apply to prospective applicants for credit. However, the Court of Appeals for the Seventh Circuit reversed that decision and remanded the case to the district court, after which the parties reached their settlement.
In denying the parties’ joint motion to vacate that settlement, Judge Valderrama now states that more is at stake than the parties’ current alignment. The court must now also consider that the parties were not engaged in a private dispute – rather, the mortgage company’s alleged wrongdoing affected the public. In addition, the judge wrote that the court must consider the public interest in the finality of judgments.
The court considered the claims regarding deficiencies in the initial agency decision to bring the case, and the counter-arguments of the 14 nonprofit organizations that filed an amicus brief opposing the motion to vacate. Referring to the agency’s present assertion that its case lacked merit, the court called it “an act of legal hara-kiri that would make a samurai blush.” The court stated that it would be unprecedented under these circumstances to vacate a settlement voluntarily entered into by the parties, and it declined to take that step.
Recent news reports have indicated that several financial institutions have sought to take advantage of the current administration’s apparent willingness to reverse the actions of the prior administration. While one could argue that courts should grant motions filed by both parties, the Northern District of Illinois held that doing so in this case would open a Pandora’s box.