Federal Judge Questions $68M Settlement Over Lack of Victim Compensation for Alleged Predatory Lending Scheme

Federal Judge Questions DOJ’s $68 Million Settlement with Texas Developer

A federal judge has raised serious concerns about a proposed $68 million settlement between the U.S. Department of Justice (DOJ) and Colony Ridge, a Texas land developer accused of predatory lending practices targeting Hispanic residents. During a hearing, U.S. District Judge Alfred H. Bennett questioned why the agreement failed to include compensation for victims and instead allocated $20 million to law enforcement.

“I thought I was dealing with … folks who had been defrauded, with allegations of above-market interest rates, improper foreclosures,” Judge Bennett said. “Now, all of the sudden, I’m being asked to OK increased law enforcement?”

The DOJ announced on Friday that it would move forward with the settlement despite the judge’s objections, which centered on the lack of victim compensation and the inclusion of law enforcement funding unrelated to the original allegations.

Judge Questions $20 Million Allocation to Law Enforcement

Judge Bennett openly challenged the $20 million earmarked for police and immigration enforcement, questioning its relevance to the case. The original lawsuit against Colony Ridge, filed in 2023, made no mention of public safety or immigration concerns.

“Who in the settlement room said it would be a good idea to give $20 million to law enforcement?” Bennett asked. “Where did that come from?”

Justice Department senior prosecutor Varda Hussain responded that the provision originated from the office of Texas Attorney General Ken Paxton, whose office also filed a similar lawsuit against Colony Ridge. Paxton’s office did not respond to a request for comment.

Hussain, a principal deputy chief at the DOJ’s Washington headquarters, defended the provision, stating that residents had expressed concerns about crime in the development after the lawsuit was filed. “I understand what it might look like to you, but I am telling you that this is a concern that friends of the court and residents will tell you exists,” she said.

Settlement Ends Three-Year Legal Battle Over Predatory Lending

The proposed settlement resolves a three-year legal dispute in which the DOJ and the Consumer Financial Protection Bureau (CFPB) accused Colony Ridge of deceiving tens of thousands of Hispanic consumers into taking out high-interest loans they could not afford. Prosecutors alleged that the developer then profited by foreclosing on the properties.

Former DOJ and CFPB attorneys and investigators, including those involved in the original 2023 lawsuit, told ProPublica and The Texas Tribune they were stunned that the settlement did not include compensation for victims. An analysis by the news organizations found that out of 183 housing and civil enforcement settlements the DOJ has announced since 2018, only 6% lacked victim compensation, and none included funding for law enforcement or immigration enforcement.

“I thought I was dealing with … folks who had been defrauded, with allegations of above-market interest rates, improper foreclosures. Now, all of the sudden, I’m being asked to OK increased law enforcement?” — U.S. District Judge Alfred H. Bennett