Posts tagged ‘First Amendment’

When a Company’s Comments Violate Federal Law

If you’ve never been to the South Side of Chicago, one of the only things you know about it is that it’s the poor part of town; after all, it is the home of Jim Croce’s Bad, Bad Leroy Brown and Frank Gallagher (Shameless) and, more than a few times the scene of crimes investigated by the cleverly corrupt Frank Voight in Chicago PD. But a local Chicago mortgage banker went too far when it used its local radio show/podcast to discourage people from buying homes in the area, according to the CFPB.

In one of the highest profile fair lending cases of the Kathy Kraninger era, the Bureau is suing Townstone Mortgage Company for violating the Equal Credit Opportunity Act and its implementing regulations, as well as for engaging more generally in discriminatory practices. I’ve been hesitant to talk about the case because the fact pattern is so unique that I wasn’t sure that much useful guidance could be gleaned from the litigation. But last week, the Defendant company moved to dismiss the lawsuit, ensuring that this is not a case that will go away quietly.  

According to the CFPB’s complaint, “Townstone acted to meet the needs of majority-white neighborhoods in the Chicago MSA (metropolitan statistical area) while ignoring the credit needs of majority African-American neighborhoods, thereby discouraging prospective applicants from applying to Townstone for mortgage loans in their neighborhoods.” The core of the CFPB’s complaint stems from the Townstone Financial Show, which started airing in 2014. It was co-hosted by executives at the company, and the company generated more than 90 percent of its applicants from radio advertising, including through the show. Among the statements, during a 2017 segment, the CEO described having to visit an old grocery store as “having to go to the Jewel on Division, we used to call it Jungle Jewel, there were people from all over the world going into the Jewel. It was packed. It was a scary place.” In another episode, he describes the South Side of Chicago between Friday and Monday as “hoodlum weekend.” 

Last Friday, the company filed a motion seeking to dismiss the CFPB’s complaint. First, it argues that the ECOA isn’t applicable in this case because it outlaws discrimination against mortgage applicants, not potential mortgage applicants. However, to win this argument, the company will have to successfully show that Regulation B, which outlaws discrimination against applicants, goes beyond the scope of federal law by also prohibiting lenders from discouraging potential applicants from applying for mortgage loans. The Defendant also makes a free speech argument, contending that even if its statements were discriminatory, they were protected under the first amendment. 

I will keep you posted, but I trust readers of this blog already know that we are well-past the age where it is acceptable for lenders to disparage potential customers because of where they come from or what they look like.  

October 29, 2020 at 9:28 am 1 comment

Why This TCPA Case Matters To Your Credit Union

The Supreme Court yesterday heard a case challenging the constitutionality of the Telephone Consumer Protection Act (TCPA). If press reports are accurate, the justices seem as confused about the TCPA as every business and credit union that has struggled with its restrictions. It’s possible, just possible, that this case will result in giving you more flexibility to reach out to your members.

The TCPA generally prohibits businesses from calling, emailing or texting consumers using auto-dialers without first getting their permission. The statute contains an exception however for calls involving the collection of federal loans. For example, the statute doesn’t bar lenders from pestering former students with robocalls about repaying their delinquent college loans. In addition, as I have explained in many a blog, the statute not only applies to robocalls but to any call made using a system capable of making robocalls.

In Barr v. American Association of Political Consultants Inc. the Association argues that these exceptions demonstrate that the statute violates the First Amendment since its restrictions are based on the content of the robocaller’s message. A lower court agreed but refused to strike down the entire statute. Instead, that court eliminated the exception in the statute that allows Federal debt collectors to make unsolicited phone calls. In the case before the Supreme Court, the consultants are asking the court to confirm that the statute violates the First Amendment. According to the Court watchers, most justices seem inclined to agree that the statute violates the First Amendment.

The exciting part for our purposes (yes I get excited easily) is that the Court may find that its only remedy is to strike down the statute in its entirety. This is no minor issue. The TCPA has become the single most litigated consumer protection law in the country. Its broad interpretation has exposed many a credit union to a potential class action lawsuits and made it more difficult than it should be for the industry to reach out to its members.


May 7, 2020 at 9:55 am 1 comment

In God, and Accountants, We Trust

Yesterday, the Court of Appeals for the Second Circuit addressed for the first time a challenge to the Constitutionality of federal legislation that mandates that “in God we trust” be placed on all U.S. currency. See Newdow v. Peterson, 13-4049, Ct. App. (Second Circuit).  In making its ruling, the Circuit joined several other federal courts in upholding the mantra against First Amendment challenges that it violates the Establishment Clause.

The First Amendment provides that “Congress shall make no law respecting an establishment of religion.”  So, in all honesty, if you were to limit yourself to just the plain text the people who brought this suit have a point.  They are self-proclaimed Atheists who feel that by having to carry around coins and cash emblazoned with a reference to God, they are being made to endorse a religious view they don’t hold.

However, the Establishment Clause has never been read as strictly as they are suggesting it should.  In this case, currency clearly has a secular purpose and most people understand that someone handing a merchant a dollar bill is executing a financial transaction and not engaging in a religious activity.  Bottom line:  as far as the Second Circuit is concerned, we can continue to trust God if we want.

New Accounting Guidance for Revenue Recognition Finalized

First, a caveat:  my father and sister are accountant and my niece, who occasionally reads this blog, seems to be having a great time training to become one at Northeastern University.  I am not and there is a reason I went to law school rather than work with my father.  That being said, you may want to ask your accountant what impact, if any, a new guidance finalized by the Financial Accounting Standards Board (FASB) may have on your credit union.  Specifically, the guidance aims to standardize the recognition of revenue derived from contracts with customers.  As a result, it will not impact the purchase or sale of a financial instrument, but it may impact when your credit union can recognize fee income generated from a mortgage, for example.

On that note, have a nice day and great job by all of you who weighed in on NCUA’s risk-based capital proposal.


May 29, 2014 at 8:29 am Leave a comment

Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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