The CFPB Tried to Refund a $105,000 Penalty. A Judge Said No.

A Regulator Asked to Unwind Its Own Win — And Lost

On March 26, 2025, Acting CFPB Director Russ Vought did something almost no federal enforcement agency has ever done. He asked a court to vacate the CFPB's own settlement, dismiss every claim, and refund the $105,000 penalty Townstone Financial had already paid, per the CFPB's own press release.

The agency called its prior case "abusive" and "unjust." The judge was not persuaded. On June 12, 2025, Judge Franklin U. Valderrama denied the joint Rule 60(b)(6) motion, holding that the parties failed to demonstrate the "extraordinary circumstances" required to unwind a final judgment, according to the court's order.

This is not a case about redlining doctrine. It is a case about what happens when a change in political administration collides with the finality of a signed consent decree. The message for every regulated firm is unmistakable: a settlement is a settlement, even when the regulator later decides it wishes it had never sued you.

How Townstone Got Here: Five Years, Two Reversals, One Refund Fight

The procedural history matters because it is the whole story. Follow the pivots.

• July 15, 2020. The CFPB sued Townstone Financial, Inc. and Barry Sturner in the Northern District of Illinois (case no. 1:20-cv-04176), alleging violations of the Equal Credit Opportunity Act, Regulation B, and the Consumer Financial Protection Act for discouraging prospective African American applicants in the Chicago area. Per the CFPB enforcement record, this was the first public federal redlining action against a nonbank mortgage lender and broker.
• February 3, 2023. Judge Valderrama dismissed the case, holding ECOA reaches only actual applicants, not prospective ones.
• July 11, 2024. The Seventh Circuit reversed (No. 23-1654, 107 F.4th 768), holding Regulation B's prohibition on discouraging prospective applicants is consistent with ECOA's text.
• November 7, 2024. The court entered a Stipulated Final Judgment requiring Townstone to pay a $105,000 civil money penalty to the CFPB's victims relief fund. The claim against Sturner was dismissed.
• March 26, 2025. New CFPB leadership moved to vacate that very judgment and refund the money.

Townstone won at the trial court, lost at the appellate court, settled, and then watched the agency try to hand the money back. That sequence is the point.

Enforcement Signal-Reading: Why the Denial Matters More Than the Motion

The natural reading of this story is that the CFPB reversed course on redlining. That reading is incomplete.

The doctrine did not move — the politics did

The Seventh Circuit's holding that Regulation B covers prospective applicants remains binding law in the Seventh Circuit. Nothing about the June 12 denial disturbed it. What changed was the identity of the agency's director and the enforcement appetite that came with it.

For firms trying to read enforcement signals, that distinction carries real consequences:

• A friendly administration cannot retroactively erase a signed judgment. The court treated the CFPB and Townstone as ordinary litigants bound by their own stipulation, not as a regulator with special power to rewrite the past.
• Appellate precedent survives a change in enforcement priorities. The 107 F.4th 768 holding is available to private plaintiffs and future regulators regardless of who runs the Bureau today.
• "Extraordinary circumstances" is a high bar by design. Rule 60(b)(6) is not a political reset button. The court found that vacating a voluntarily-entered consent decree would undermine the finality of judgments.

The real question

The real question is not whether the CFPB still wants to pursue redlining. It is whether a consent decree you sign today can be relied upon tomorrow. The answer, for now, is yes — and that cuts both ways for regulated firms.

What Nonbank Lenders and Fintech Originators Should Do Now

Townstone was the first nonbank lender hauled into a public federal redlining action. It will not be the last, regardless of which party controls the CFPB. Here is what warrants immediate attention.

Treat prospective-applicant conduct as regulated conduct

First, audit your marketing and outreach, not just your underwriting. The Seventh Circuit confirmed that ECOA and Regulation B reach conduct that discourages prospective applicants. Advertising, radio spots, social media, and geographic targeting all fall within scope.

Second, do not assume a favorable enforcement climate is permanent. Appellate precedent outlives administrations. Build compliance to the law as courts have interpreted it, not to the current Bureau's stated priorities.

Understand what a settlement actually locks in

Third, treat every consent decree as durable. The Townstone denial confirms that neither party — not even the agency — can casually unwind a stipulated judgment. Negotiate the terms as if they are permanent, because a court will treat them that way.

Fourth, watch the statistical screens. The CFPB's own filings describe a "redlining screen" that flagged thousands of companies. Firms with lending footprints in majority-minority areas should run their own fair-lending analytics before an examiner does it for them.

Key Takeaways

• A regulator cannot simply refund a penalty it collected. On June 12, 2025, the court denied the CFPB's joint motion to vacate its own $105,000 settlement, holding the parties failed to show "extraordinary circumstances."
• Appellate precedent survives a change in administration. The Seventh Circuit's July 11, 2024 ruling (107 F.4th 768) that Regulation B reaches prospective applicants remains binding law regardless of current CFPB enforcement priorities.
• Consent decrees are durable by design. The court refused to let a voluntarily-entered Stipulated Final Judgment be unwound, protecting the finality of judgments and public confidence in the courts.
• Nonbank lenders remain exposed to redlining theory. Townstone was the first public federal redlining action against a nonbank mortgage lender and broker, and the legal theory behind it did not go away when the Bureau tried to.
• Marketing conduct is fair-lending conduct. Discouraging prospective applicants — through advertising, targeting, or outreach — falls squarely within ECOA and Regulation B.