CFPB and Mortgage Lender Move to Vacate Prior "Redlining" Settlement

The CFPB and a non-bank mortgage lender jointly filed a motion for vacatur of a prior settlement concerning "redlining."

In a Memorandum of Law, filed in the US District Court for the Northern District of Illinois, the Senior Advisor to the Consumer Financial Protection Bureau declared that "there were significant undisclosed problems with the Bureau's treatment of this case, resulting in unmerited investigation and litigation and the infringement of the Defendants' First Amendment rights, which warrant relief." 

The initial investigation stemmed from a CFPB computer model that flagged the firm based on an alleged "shortfall" of 31 mortgage applications from majority-minority neighborhoods. The CFPB's reliance on the model's "redlining screen" led to scrutiny of the firm, despite no one coming "forward to complain" about its actions. In the Court fillings, the CFPB stated that it "commenced and continued its investigation and litigation without a substantial predicate of actionable facts and targeted the co-defendants ... based on constitutionally protected speech ... This action should not have been filed."

The CFPB said that potential penalties against the firm could have exceeded $42 million for alleged civil rights violations—penalties tied to "16 minutes of radio banter that were not racial in nature."