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The Justice Department and State of Texas recently entered into a settlement agreement with Colony Ridge Development, LLC and related entities (Colony Ridge) to settle allegations that Colony Ridge violated certain federal and state laws. The Justice Department had alleged violations of the Equal Credit Opportunity Act (ECOA) and Fair Housing Act (FHA). Texas had alleged violations of the Texas Deceptive Trade Practices Act (DTPA), Consumer Financial Protection Act (CFPA) and Interstate Land Sales Full Disclosure Act (ILSA). In entering into the settlement agreement, Colony Ridge expressly denied any wrongdoing alleged by, or that could have been alleged by, the Justice Department or the State of Texas.
As previously reported, in December 2023 the CFPB and Justice Department filed a joint complaint against Colony Ridge in the U.S. District Court for the Southern District of Texas alleging that Colony Ridge engaged in discriminatory targeting of Hispanic consumers with predatory financing and other unlawful conduct. Texas separately filed suit against Colony Ridge in the same court alleging false, misleading, and deceptive sales, marketing, and lending practices. In September 2024, the court granted Colony Ridge's motion to dismiss one of the FHA claims and denied its motion to dismiss all other claims of the CFPB and Justice Department. The allegations focused on Colony Ridge conduct in connection with the development of lots for sale in Liberty County, Texas and the financing of purchases of those lots.
The settlement agreement contains many typical terms for matters of this type and includes terms that are not so typical. It specifically requires Colony Ridge to comply with the "intrastate sales" exception to the ILSA by "requiring purchasers to present an unexpired Texas-issued driver's license, a Texas-issued identification card, a limited-term Texas-issued driver's license issued after January 1, 2025 or an unexpired passport and valid visa issued or renewed after January1, 2025."
In a press release announcing the settlement, Assistant Attorney General Harmeet K. Dhillon stated "[t]his DOJ will go after all lenders, financiers, and land developers who participate in schemes which ultimately encourage illegal immigration." The atypical terms include terms that appear to reflect the Justice Department's characterization of Colony Ridge's operations as a predatory scheme ultimately encouraging illegal immigration. Specifically, Colony Ridge agreed to:
- Work with law enforcement to confirm that buyers are not on a published terrorism watch list and are not known members of a transnational criminal organization.
- Expend an aggregate amount of $20 million to enter into and/or
come into compliance with local, state, and federal agreements, to
increase law enforcement presence and effectiveness within the
Terrenos Houston Subdivisions. In particular, the funds will be
expended to carry out law enforcement activities, which may
include:
- General local law enforcement, including, primarily, funding additional delegated immigration enforcement authority from the federal government to the Liberty County Sheriff's Office and Liberty County Constable offices;
- Construction of a Texas Department of Public Safety and/or County Constable sub-station on-site within the Terrenos Houston Subdivisions;
- Funding for at least two additional full-time law enforcement officers to patrol the development, who shall be funded and allocated consistent with the existing Law Enforcement Services Agreement between a property owners association and Liberty County; and
- The purchase of law enforcement equipment, gear, and vehicles for items and services associated with the property owners of Colony Ridge, and at the discretion of the Liberty County Constable and Liberty County Sheriff's Office.
- Create and present for the United States's and Texas's non-objection, a discount program designed to meaningfully encourage peace officer residency within the Terrenos Houston Subdivisions.
As previously reported, under Acting Director Vought the CFPB has successfully sought the early termination of several redlining consent orders, which requires approval of the court, although the motion for the early termination of the Lakeland Bank consent order, which is being opposed, is still under consideration by the court. The Colony Ridge settlement agreement provides for a three-year term. Apparently, to avoid the need for court approval of an early termination of the settlement agreement, the agreement includes the following provision:
"If, at any point, the United States and the State of Texas determine that Colony Ridge has substantially complied with this Agreement, including by fulfilling this Agreement's terms and exhibiting a sincere and demonstrated commitment to future remediation, the United States and the State of Texas may jointly terminate this Agreement prior to its expiration date."
Presumably, any future fair lending settlements involving the CFPB and/or Justice Department during the Trump Administration will include a similar provision.
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