Chicago Lender, CFPB Fight Over Chevron in Racist Podcast Appeal

The Consumer Financial Protection Bureau and a Chicago mortgage lender accused of fair lending violations are battling over the meaning of a recent US Supreme Court ruling limiting judicial deference to regulatory agencies.

The high court’s June ruling in Loper Bright Enterprises v. Raimondo said that courts no longer must defer to federal regulators’ interpretation of ambiguous federal statutes. Instead, courts can receive guidance from a regulator but must make their own determination of what the right interpretation of a federal law is in deciding on whether a regulation or enforcement action is proper.

In the CFPB v. Townstone Financial Inc. case, pending before the US Court of Appeals for the Seventh Circuit, the two sides have differing views on how the new standard, eliminating Chevron deference, should be put into practice.

The CFPB is appealing a lower court decision dismissing its claims that Townstone used racist language in radio programs and podcasts to discourage potential Black borrowers from applying for mortgages. The agency said in a July 2 letter to the court that its interpretation of the Equal Credit Opportunity Act is correct.

No deference is needed in determining that the Federal Reserve issued its interpretation that Regulation B, the enacting regulation for the 1974 fair lending law, applied to advertising and other practices when putting together the original rule “and has been consistent over nearly 50 years’ time,” the CFPB said.

Townstone responded in a July 3 letter that the CFPB is attempting to reinstate judicial deference in violation of the Supreme Court’s Loper Bright ruling.

“What the Court did not do in Loper Bright is usher deference out the front door while surreptitiously escorting it back in through the rear, as CFPB seems to think,” the letter from Steven M. Simpson of the Pacific Legal Foundation, the attorney representing Townstone, said.

The Seventh Circuit shouldn’t accept the CFPB’s interpretation of ECOA’s applicability to radio and podcasts, as the agency argues, without determining on its own behalf whether the CFPB is correct, Simpson wrote.

And the CFPB’s interpretation is wrong because it applies a law dealing with credit decisions to actions directed at people who haven’t applied for a loan.

“It rewrites ECOA’s central prohibition,” Simpson wrote.

The case is CFPB v. Townstone Fin. Inc., 7th Cir., No. 23-01654, Citation of Additional Authority 7/3/24