Industry witnesses tell CFPB advisory board prior enforcement targeted firms over speech, not discrimination

Steve Simpson, director of separation-of-powers litigation at the Pacific Legal Foundation, told the Consumer Financial Protection Bureau's Consumer Advisory Board that the bureau's 2020 enforcement matter against Townstone began with a statistical screen and audio mining of a small mortgage company's radio program and "there was never really any evidence of discrimination at all." Simpson said CFPB identified roughly 16 minutes of comments in 79 hours of content and pursued a multi-year investigation that ended in a $100,000 settlement.

Jim Judich, general counsel and chief legal officer at Public Square, and David Herman, general counsel at Cordova Financial, described a separate multi-year inquiry that began in February 2021 and shifted to target Cordova after regulators learned of the company's work in the firearms and outdoor retail market. "It became clear ... this was less about protecting consumers and more about shutting down lawful commerce in a disfavored industry," Herman said, describing repeated changes in enforcement theories and lengthy periods of silence followed by bursts of activity tied to corporate events.

Both outside guests said CFPB and outside enforcement partners used data-driven screens and unconventional investigatory tactics. Simpson described a "redlining screen" CFPB used to flag lenders with below-average minority-application rates, then said regulators used audio-mining software to find isolated comments that were characterized as offensive. Cordova's counsel said draft consent orders contained nonstandard disclosure requirements and injunctive provisions that would have made the company noncompetitive or effectively unable to operate.

CFPB senior adviser Victoria Dorfman, who led the meeting, said bureau leadership has reviewed internal documents and moved to correct what it identified as problematic processes: "We have undertaken an extensive review of the operations and during that time we have made changes consistent with this administration's policies and priorities," she said, outlining steps the bureau has taken to withdraw or limit prior enforcement approaches.

The witnesses and CFPB officials diverged sharply over whether the bureau's actions reflected misuse of authority or legitimate consumer-protection tools. Simpson and Cordova's counsel emphasized litigation costs, repeated inquiries, and the absence of identified victims as reasons the process was abusive. CFPB officials said they are prioritizing cases with direct evidence of consumer harm and are reviewing supervisory materials to avoid politicized or reputationally based enforcement.

The CAB hearing included public discussion about the role of cooperating state offices. Cordova representatives criticized coordination with the New York attorney general's office, saying NYAG attorneys participated in depositions and questions in ways they viewed as irregular and that NYAG lacked a clear nexus to Cordova's business.

The meeting did not produce any vote or formal agency action in the room; it served as a venue for witnesses to explain their cases and for CFPB staff to summarize internal reviews and planned policy adjustments. CFPB staff said earlier enforcement orders tied to disparate-impact theories are being reassessed; outside witnesses said those changes did not remove the harm already experienced by small companies.

The advisory board discussion continued with CAB member remarks raising concerns about narrowing disparate-impact liability and the impacts on communities of color, signaling the continuing divide between civil-rights advocates and industry representatives about the bureau's approach.

The board adjourned after opening the record for CAB members to provide feedback and asking stakeholders to submit additional materials.