REFILE-US court blocks CFPB move to scrap racial discrimination settlement

By Douglas Gillison

June 12 (Reuters) - A federal judge in Chicago on Thursday refused to allow the U.S. Consumer Financial Protection Bureau to vacate a racial discrimination settlement reached last year with a mortgage lender, finding there was no basis for granting an extraordinary request.

The decision marked a setback after senior Trump administration officials claimed in March they were seeking redress for a company, Townstone Financial, that they said had been baselessly "persecuted" without evidence.

Representatives for the agency and Townstone, which jointly filed the motion with the CFPB, did not immediately respond to requests for comment.

The CFPB originally brought the case in 2020 during Donald Trump's first presidency, accusing Townstone of "redlining" by discouraging would-be Black home buyers from applying for mortgages through derogatory and disparaging comments in promotional materials.

U.S. District Judge Franklin Valderrama cast doubt on CFPB claims that there had been no evidence underlying the CFPB's original case. Reversing a prior CFPB action in this way, he said, amounted to "an act of legal hara-kiri that would make a samurai blush."

"At bottom, to grant the motion based on the arguments advanced by the parties would be to undermine the finality of judgments," Valderrama said. "That is a Pandora's box the court refuses to open."