An Illinois federal district court judge presiding over a revived redlining case denied a joint motion to vacate a 2024 voluntary settlement between the Consumer Financial Protection Bureau (CFPB) and a Chicago-based non-bank lender.
In November 2024, the parties voluntarily entered into a settlement to resolve the CFPB’s allegations that the non-bank lender purportedly violated the Equal Credit Opportunity Act (ECOA) by engaging in discriminatory lending practices. The CFPB alleged that the company’s president and chief executive officer and his co-host made statements during the company’s radio show and podcast that allegedly discouraged prospective African-American applicants from applying for loans with the company. These alleged statements described majority African-American Chicago neighborhoods in an allegedly derogatory manner. As part of that settlement, the company had agreed to (i) pay a $105,000 fine; (ii) implement and maintain compliance policies and procedures relating to the ECOA; and (iii) submit to compliance monitoring for a five-year period. The court entered the stipulated settlement and terminated the case that same month.
However, earlier this year, the parties filed a joint motion to vacate their settlement. In support of the joint motion, they argued that the enforcement action – which was brought under the first Trump Administration – should not have been brought because there was insufficient evidence of discrimination. They also argued that the enforcement action purportedly violated the company’s First Amendment rights because it sought to punish and suppress the company’s protected speech.
In a strongly worded decision, U.S. District Judge Franklin U. Valderrama, who had approved the settlement and terminated the case, denied the motion describing the current CFPB as engaging “in an act of legal hara-kiri that would make a samurai blush.” Judge Valderrama found that there was no extraordinary circumstance to justify vacating the parties’ voluntary and final settlement agreement. He also rejected the First Amendment arguments. While the parties had briefed this constitutional issue in their motion to dismiss briefing, the district and appeal courts declined to address this issue in their respective rulings. Instead, their rulings only relied on whether ECOA’s protections extended to prospective applicants.
Judge Valderrama also found that the need for finality of judgments outweighed the parties’ desire to vacate their settlement because (i) the settlement was not just a private matter between private parties, but, rather, a settlement related to conduct that affected the public; (ii) granting the parties’ motion would erode public confidence in the finality of judgments, especially those that had a public impact; and (iii) granting the motion would set a bad precedent for new administrations looking to unwind any voluntary resolutions reached under a prior administration merely because of political differences.
Given the Trump Administration’s priorities and positions, this lender is not the only company that has sought to vacate a prior voluntary agreement with the CFPB and other companies may be tempted to follow suit. In May, a Tennessee federal district court judge vacated a consent order 1.5 years before it was set to expire. In support of the motion to terminate, the CFPB and DOJ stated that the company had fully disbursed the settlement fund, had paid the entire civil money penalty, and had substantially complied with the other monetary and injunctive terms of the consent order. Companies looking to try their luck, should consider (i) whether the court that entered the settlement retains jurisdiction over that settlement even after the court has terminated the case; (ii) whether that court is in a consumer-friendly jurisdiction; (iii) whether the company has substantially complied with the settlement terms; and (iv) whether the settlement is set to expire soon, amongst other considerations. Even still, companies should not expect courts to vacate their settlements simply because of a change in administration.
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