Consumer Financial Protection Bureau v. TOWNSTONE FINANCIAL , INC . and BARRY STURNER

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 23-1654
C ONSUMER F INANCIAL PROTECTION BUREAU,
Plaintiff-Appellant,
v.
TOWNSTONE F INANCIAL , I NC . and BARRY S TURNER ,
Defendants-Appellees.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:20-cv-04176 — Franklin U. Valderrama, Judge.
____________________
A RGUED DECEMBER 8, 2023 — DECIDED J ULY 11, 2024
____________________
Before SYKES , Chief Judge, and R IPPLE and R OVNER , Circuit
Judges.
R IPPLE, Circuit Judge. Congress originally enacted the
Equal Credit Opportunity Act (the “ECOA”), 15 U.S.C. § 1691
et seq., in order to ensure that firms engaged in the extension
of credit make that credit equally available without regard to
an applicant’s sex or marital status. The ECOA was soon
amended to prohibit creditors from discriminating on the
basis of additional categories: race, color, religion, national

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origin, and age. Congress delegated authority to the Federal
Reserve Board (the “Board”) to enact regulations to carry out
the ECOA’s purpose. Pursuant to that authority, the Board
enacted “Regulation B,” which exists in substantially the
same form today and prohibits creditors from discouraging,
on a prohibited basis, applicants or prospective applicants
from making or pursuing an application for credit. Congress
later transferred the Board’s authority to the Consumer
Financial Protection Bureau (the “CFPB” or “Bureau”).
In July 2020, the CFPB brought this action against
mortgage lender Townstone Financial, Inc. (“Townstone”)
and its cofounder and chief executive officer, Barry Sturner.
The CFPB alleged that Townstone and Mr. Sturner had
discouraged black prospective applicants from applying for
mortgage loans with Townstone, in violation of Regulation B,
by making, over a period of years, several statements on their
long-form commercial advertisement radio show.
Townstone and Mr. Sturner filed a motion to dismiss, and
the district court granted the motion. The district court held
that the ECOA does not authorize the imposition of liability
for the discouragement of prospective applicants.
For the reasons set forth in the following opinion, we take
a different view. When the text of the ECOA is read as a
whole, it is clear that Congress authorized the imposition of
liability for the discouragement of prospective applicants.
Regulation B’s prohibition on discouraging prospective
applicants is therefore consistent with the ECOA’s text and
purpose. We accordingly reverse the decision of the district
court and remand for proceedings consistent with this
opinion.

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No. 23-1654 3
I
BACKGROUND
A.
This case comes to us from the district court’s grant of
Townstone’s motion to dismiss under Rule 12(b)(6) of the
Federal Rules of Civil Procedure. We therefore take as true the
allegations of the amended complaint and base the following
factual recitation on those allegations.
Townstone is a non-depository mortgage lender or
mortgage broker engaged exclusively in mortgage lending.
Mr. Sturner is the cofounder, sole owner, and sole director of
Townstone. He also serves as Townstone’s president and
chief executive officer. Incorporated in Illinois and
headquartered in Chicago, Townstone operates in four other
states: Indiana, Michigan, Wisconsin, and Florida. Most of its
mortgage lending and brokering activity occurs in the
Chicago-Naperville-Elgin Metropolitan Statistical area (the
“Chicago MSA”).1 The population of the Chicago MSA is
approximately 9.46 million persons. About 1.6 million (17%)
of those persons are black.
Beginning in 2014 or earlier, Townstone started
broadcasting its own radio show and podcast, called “The
Townstone Financial Show.” The show is co-hosted by
Mr. Sturner and another senior loan officer in a format often
referred to as a “long-form commercial advertisement.”2
1 The Chicago MSA comprises fourteen counties, including counties from
Illinois (nine counties), Indiana (four counties), and Wisconsin (one
county).
2 First Am. Compl. ¶ 26.

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During the Townstone Financial Show, the hosts discuss
mortgage-related issues, take questions from prospective
applicants, and discuss their work at Townstone. When the
hosts take a commercial break, the radio show plays shorter
advertisements for Townstone. The Townstone Financial
Show was originally broadcast on AM radio to the Chicago
MSA. It has also been available in podcast form on
Townstone’s website, streamed on Facebook Live, and
advertised on various social media platforms.
According to the CFPB’s complaint, the hosts of the
Townstone Financial Show regularly have made statements
that would discourage black prospective applicants from
applying for mortgage loans. The complaint identifies five
such instances.
First, in January 2014, a caller from Markham, Illinois, a
municipality in Cook County with a population that is
predominantly black, asked the hosts how he and his wife
could improve their credit scores. In response, one of the hosts
responded: “[You’ve] got to keep those women in line over
there in Markham. … [S]top spending freaking money [on
your wife] and tell her to get a better job.”3 The host then
discussed Markham generally and made statements such as
“it’s crazy in Markham on weekends” and “[y]ou drive very
fast through Markham, … and you don’t look at anybody or
lock on anybody’s eyes in Markham.”4
Second, again in January 2014, the hosts informed listeners
that it was a “great time” to buy, sell, and rent, and
3 Id. ¶ 33.
4 Id.

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No. 23-1654 5
recommended that those doing so should “take down the
Confederate flag.”5
Third, in June 2016, Mr. Sturner stated that the South Side
of Chicago is “hoodlum weekend” between Friday and
Monday, and that the police are “the only ones between that
[area] turning into a real war zone and keeping it where it’s
kind of at.”6
Fourth, in January 2017, Mr. Sturner described a Jewel-
Osco grocery store in downtown Chicago as “Jungle Jewel.”7
He described the store as “a scary place” because the store’s
patrons “were people from all over the world.”8
Fifth and finally, in November 2017, when discussing one
host’s recent skydiving experience, another host stated that a
person “walking through the South Side at 3AM [would] get
the same rush” as they would skydiving.9
In addition to these five instances, the CFPB’s complaint
also provides statistical information supporting its view that
Townstone’s business acts and practices led to less black
prospective applicants applying for credit from Townstone
than would have been the case in the absence of these
discriminatory practices. The CFPB alleges that, during the
years 2014 through 2017, when compared to its peer
institutions operating in the Chicago MSA, Townstone
5 Id. ¶ 34.
6 Id. ¶ 35.
7 Id. ¶ 36.
8 Id.
9 Id. ¶ 37.

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6 No. 23-1654
received fewer mortgage applications from black applicants,
fewer mortgage applications for properties in neighborhoods
with a high-black population (defined as neighborhoods in
which 80% or more of residents are black), and fewer
mortgage applications for properties in neighborhoods with
a majority of black residents.
B.
In July 2020, the CFPB brought the present action against
Townstone in the United States District Court for the
Northern District of Illinois.10 The CFPB later amended its
complaint and added Mr. Sturner as a defendant. Based on
the allegations just described, the CFPB’s amended complaint
presents three claims: one count of violating the ECOA, see
15 U.S.C. § 1691(a)(1), and one of its regulations, Regulation
B, see 12 C.F.R. § 1002.4(b); one count of violating the
Consumer Financial Protection Act of 2010, see 12 U.S.C.
§ 5536(a)(1)(A); and one count of fraudulent transfer, in
violation of 28 U.S.C. §§ 3301–3308. Townstone and
Mr. Sturner filed a motion to dismiss.
The district court granted the motion to dismiss. The court
focused on the ECOA’s definition of applicant as “any person
who applies to a creditor directly for an extension, renewal,
or continuation of credit, or applies to a creditor indirectly by
use of an existing credit plan for an amount exceeding a
previously established credit limit.” 15 U.S.C. § 1691a(b).
Based on this definition, the district court concluded that “it
is clear that the ECOA does not apply to prospective
10 The CFPB has authority to enforce the ECOA and its corresponding reg-
ulations by commencing a civil action. See 15 U.S.C. § 1691c(a)(9);
12 U.S.C. § 5564.

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No. 23-1654 7
applicants.” CFPB v. Townstone Fin., Inc., No. 20-cv-4176, 2023
WL 1766484, at *5 (N.D. Ill. Feb. 3, 2023).
To support its conclusion, the court also relied on a line of
cases from this circuit and others holding that a “guarantor”
was not an “applicant” under the ECOA. It then rejected the
CFPB’s argument that its enforcement and rulemaking
authority allowed it to prohibit discouragement of
prospective applicants. It reasoned that the “[t]he CFPB
cannot regulate outside the bounds of the ECOA, and the
ECOA clearly marks its boundary with the term ‘applicant.’”
Id. at *7.
Because the district court determined that the ECOA could
not apply to prospective applicants, it dismissed Count I. It
then dismissed Counts II and III, explaining that those counts
were dependent on the success of Count I.
The CFPB appealed.
II
DISCUSSION
A.
We begin our analysis with an examination of the textual
history of the statute and the regulation. Congress enacted the
ECOA in 1974. In the initial version of the statute, Congress
stated that the legislation’s purpose was to ensure “that
financial institutions and other firms engaged in the extension
of credit make that credit equally available to all creditworthy
customers without regard to sex or marital status.” Equal
Credit Opportunity Act of 1974, Pub. L. No. 93-495, § 502,
88 Stat. 1500, 1521 (1974). In 1976, Congress amended the
ECOA to prohibit discrimination on the basis of additional

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8 No. 23-1654
categories: race, color, religion, national origin, and age. Equal
Credit Opportunity Act Amendments of 1976, Pub. L.
No. 94-239, § 701, 90 Stat. 251, 251 (1976). Since then, the
ECOA’s scope of prohibition has provided that:
It shall be unlawful for any creditor to
discriminate against any applicant, with respect
to any aspect of a credit transaction—
(1) on the basis of race, color, religion,
national origin, sex or marital status, or age
(provided the applicant has the capacity to
contract).
15 U.S.C. § 1691(a). The ECOA defines “applicant” as “any
person who applies to a creditor directly for an extension,
renewal, or continuation of credit, or applies to a creditor
indirectly by use of an existing credit plan for an amount
exceeding a previously established credit limit.” Id.
§ 1691a(b).
The text of the ECOA vested the Board with broad
regulatory authority:
The Board shall prescribe regulations to carry
out the purposes of this title. These regulations
may contain but are not limited to such
classifications, differentiation, or other
provision, and may provide for such
adjustments and exceptions for any class of
transactions, as in the judgment of the Board are
necessary or proper to effectuate the purposes
of this title, to prevent circumvention or evasion
thereof, or to facilitate or substantiate
compliance therewith. Such regulations shall be

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No. 23-1654 9
prescribed as soon as possible after the date of
enactment of this Act, but in no event later than
the effective date of this Act.
Pub. L. No. 93-495, § 703, 88 Stat. at 1522.
This broad grant of authority was modeled after similar
language found in the Truth In Lending Act (“TILA”). See
15 U.S.C. § 1604(a). An earlier proposed version of the ECOA
had granted the Board notably diminished authority,11 but as
the statute progressed through congressional deliberation,
the Board suggested that Congress grant it “the same
regulatory authority accorded it in … the Truth in Lending
Act.” Credit Discrimination: Hearing on H.R. 14856 and
H.R. 14908 Before the Subcomm. on Consumer Affs. of the Comm.
of Banking & Currency, 93d Cong. 72 (1974) (appendix to
statement by Jeffrey M. Bucher, Member, Bd. of Governors of
the Fed. Rsrv. Sys.). The Board explained that TILA’s “grant
of authority ha[d] successfully withstood several litigation
challenges since 1969 and thus appear[ed] to be an
appropriate model.” Id. Congress accepted this view, and the
ECOA’s grant of authority to the Board was thus modeled
after the language found in TILA.
In 1991, Congress modified the ECOA to require its
enforcing regulatory agencies to refer suspected substantive
pattern and practice cases under the ECOA to the Attorney
General. FDIC Improvement Act of 1991, Pub. L. No. 102-242,
§ 223, 105 Stat. 2236, 2306 (1991); see also S. Rep. No. 102-167,
11 The earlier suggested language stated: “The Board shall prescribe such
regulations which in its judgment are necessary or proper to carry out this
Act.” H.R. 14856, 93d Cong. § 5(a) (2d Sess. 1974).

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10 No. 23-1654
at 93 (1991).12 The relevant portion of the ECOA remains the
same today and states:
Each agency referred to in paragraphs (1), (2),
and (9) of section 1691c(a) of this title shall refer
the matter to the Attorney General whenever
the agency has reason to believe that 1 or more
creditors has engaged in a pattern or practice of
discouraging or denying applications for credit in
violation of section 1691(a) of this title. Each
such agency may refer the matter to the
Attorney General whenever the agency has
reason to believe that 1 or more creditors has
violated section 1691(a) of this title.
15 U.S.C. § 1691e(g) (emphasis added). At the time, members
of Congress were concerned that the regulatory agencies
responsible for enforcing the provisions of the ECOA were
not taking appropriate action to resolve issues of credit
discrimination.13
12 Previously, the ECOA authorized but did not require the enforcing
agencies to refer matters to the Attorney General. The 1976 amendments
to the ECOA provided that, “if unable to obtain compliance” with the stat-
ute, the enforcing agencies were “authorized to refer the matter to the At-
torney General with a recommendation that an appropriate civil action be
instituted.” Pub. L. No. 94-239, § 706(g), 90 Stat. at 254.
13 See S. Rep. No. 102-167, at 92–93 (1991) (“The Committee also found
problems with fair lending enforcement, even after evidence of discrimi-
nation was identified. The regulatory agencies showed great reluctance to
take strong action against any depository institution found to be discrim-
inating. … [T]he Justice Department would likely take a more appropriate
approach to remedying discrimination. … The legislation, therefore,
( … continued)

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No. 23-1654 11
The first version of Regulation B tracked the ECOA and
prohibited creditors from discouraging applications on the
basis of sex or marital status. 40 Fed. Reg. 49,298, 49,307
(Oct. 22, 1975). The exact language stated: “A creditor shall
not make any statements to applicants or prospective
applicants which would, on the basis of sex or marital status,
discourage a reasonable person from applying for credit or
pursuing an application for credit.” Id. When the ECOA was
amended to expand its categories of prohibition, the Board
amended Regulation B to prohibit discouragement on a
“prohibited basis,” which the regulations defined as “race,
color, religion, national origin, sex, marital status, or age.”
42 Fed. Reg. 1242, 1253–54 (Jan. 6, 1977). Later, in 2010,
Congress transferred rulemaking authority from the Board to
the Bureau. Dodd-Frank Wall Street Reform & Consumer
Protection Act, Pub. L. No. 111-203, § 1085, 124 Stat. 1376,
2083–84 (2010). The Bureau then republished Regulation B,
81 Fed. Reg. 25,323, 25,325 (Apr. 28, 2016), which states in full:
Discouragement. A creditor shall not make any
oral or written statement, in advertising or
otherwise, to applicants or prospective
applicants that would discourage on a
requires the financial regulatory agencies to refer suspected substantive
pattern and practice cases of discrimination under the [ECOA] to the Jus-
tice Department.”); 137 Cong. Rec. S2519 (daily ed. Feb. 28, 1991) (state-
ment of Sen. Dixon) (“The subcommittee heard troubling statistics which
showed that blacks and minority neighborhoods got fewer loans and got
rejected for loans more often than whites and white neighborhoods—even
when incomes were comparable. We also heard about the inadequate reg-
ulatory response to this situation.”).

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12 No. 23-1654
prohibited basis a reasonable person from
making or pursuing an application.
12 C.F.R. § 202.4(b).14
B.
We now turn to an examination of the problem before us.
This case requires us to determine whether Regulation B’s
prohibition on the discouragement of prospective applicants is
consistent with the ECOA. We review questions of statutory
interpretation de novo. Coyomani-Cielo v. Holder, 758 F.3d 908,
912 (7th Cir. 2014).15
We begin with the text of the statute. We read a statute “‘as
a whole’ rather than ‘as a series of unrelated and isolated
provisions.’” United States v. Pace, 48 F.4th 741, 753 (7th Cir.
2022) (quoting Arreola-Castillo v. United States, 889 F.3d 378,
386 (7th Cir. 2018)). “The plainness or ambiguity of statutory
language is determined by reference to the language itself, the
specific context in which that language is used, and the
broader context of the statute as a whole.” Robinson v. Shell Oil
14 At the time of the 1991 amendment to the ECOA, Congress was aware
of Regulation B and its prohibition on discouragement. See S. Rep.
No. 102-167, at 86 (1991) (noting that “[d]iscouraging applications on a
prohibited basis and advertising which implies a discriminatory prefer-
ence are … prohibited” under the ECOA regulations).
15 This case was litigated before the Supreme Court’s decision in Loper
Bright Enterprises v. Raimondo, No. 22-451, 603 U.S. ___ (2024). Our decision
today takes into account that Loper Bright overruled Chevron, U.S.A., Inc.
v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). We approach
this case as presenting a question of statutory interpretation subject to our
de novo review.

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No. 23-1654 13
Co., 519 U.S. 337, 341 (1997). We therefore cannot constrain
artificially the ECOA to a single provision.16
An analysis of the text of the ECOA as a whole makes clear
that the text prohibits not only outright discrimination against
applicants for credit, but also the discouragement of
prospective applicants for credit. Congress vested the Board
(and later the Bureau) with the authority to issue regulations
“necessary or proper to effectuate the purposes of this title”
or “to prevent circumvention or evasion thereof.” 15 U.S.C.
§ 1691b(a). In endowing the Board with authority to prevent
“circumvention or evasion,” Congress indicated that the
ECOA must be construed broadly to effectuate its purpose of
ending discrimination in credit applications. Moreover, other
provisions of the ECOA strongly confirm that discouraging
applications for credit constitutes a violation of the statute.
When Congress amended its civil liability provision so that
the regulatory agencies responsible for enforcing the ECOA
would be required to refer a case to the Attorney General
whenever the agency believed a creditor “has engaged in a
pattern or practice of discouraging … applications for credit
in violation of section 1691(a) of this title,” 15 U.S.C.
§ 1691e(g), Congress thus confirmed that discouraging an
application for credit is a violation of the ECOA.
Reading the statutory language as a whole, including the
strong congressional direction that the cognizant agencies
and the Department of Justice prevent “circumvention and
evasion,” makes clear that the prohibition against
16 See FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 132 (2000)
(“[A] reviewing court should not confine itself to examining a particular
statutory provision in isolation.”).

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14 No. 23-1654
discouragement must include the discouragement of
prospective applicants. The term “applicant” cannot be read
in a crabbed fashion that frustrates the obvious statutorily
articulated purpose of the statute. Indeed, the ECOA’s scope
of prohibition prohibits discrimination “with respect to any
aspect of a credit transaction.” 15 U.S.C. § 1691(a) (emphasis
added). Congress well understood that “any aspect of a credit
transaction” had to include actions taken by a creditor before
an applicant ultimately submits his or her credit application.17
C.
Townstone submits that Regulation B violates the First
Amendment. As Townstone sees it, Regulation B is invalid
facially and as applied to Townstone’s speech on the
Townstone Financial Show. Although the issue was briefed
by both parties in the proceedings in the district court, the
district court declined to reach the argument, deeming it
unnecessary to do so in light of its conclusion that the ECOA
could not apply to prospective applicants.
“It is the general rule, of course, that a federal appellate
court does not consider an issue not passed upon below.”
17 Our conclusion that Regulation B is authorized by and consistent with
the ECOA’s plain text is not altered by previous opinions, from this circuit
and others, holding that the ECOA’s definition of “applicant” cannot in-
clude “guarantor.” In Moran Foods v. Mid-Atlantic Market Development, Co.,
LLC, 476 F.3d 436, 441 (7th Cir. 2007), we explained that “to interpret ‘ap-
plicant’ as embracing ‘guarantor’ opens vistas of liability that the Con-
gress that enacted the [ECOA] would have been unlikely to accept.” No
such unexpected or unacceptable vistas of liability are opened here. Con-
gress enacted the ECOA to prohibit discrimination in credit applications,
mandated a broad construction of the statute, and explicitly stated that
discouragement constitutes a violation of the statute.

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No. 23-1654 15
Singleton v. Wulff, 428 U.S. 106, 120 (1976). This rule is subject
to limited exceptions, AAR Int’l, Inc. v. Nimelias Enters. S.A.,
250 F.3d 510, 523 (7th Cir. 2001), but ultimately is a decision
“left primarily to the discretion of the courts of appeals, to be
exercised on the facts of individual cases,” Singleton, 428 U.S.
at 120. “In exercising this discretion, we have resolved issues
which were not resolved below where, inter alia, ‘both parties
have briefed and argued [the issue’s] merits,’ and where ‘the
benefit of a district court hearing is minimal because proper
resolution of the issue is clear.’” AAR Int’l, 250 F.3d at 523
(quoting United States v. Brown, 739 F.2d 1136, 1145 (7th Cir.
1984)). We adhere to the general rule today. If Townstone
renews this argument on remand, the district court can
address it in the first instance.
Conclusion
We hold that Regulation B’s prohibition on the
discouragement of prospective applications is consistent with
the plain text of the ECOA. We do not, however, express an
opinion on the underlying merits of the CFPB’s claim. Such
analysis is best left for the district court to address on remand.
REVERSED AND REMANDED

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