On March 6, 2026, a U.S. district court will consider whether to approve a settlement agreement resolving parallel lawsuits by the Texas attorney general (AG) and the federal government against Houston-area developer Colony Ridge Development, LLC and related companies. The complaints in both suits — which were filed during the Biden administration — claim that Colony Ridge discriminatorily targeted Hispanic consumers with predatory financing to purchase land for residences in areas that were in fact uninhabitable.

The settlement has drawn attention for its unusual injunctive terms and for the fact that none of the $68 million to be paid by the defendants will provide direct monetary restitution to affected consumers, despite both complaints originally seeking such relief. Twenty million dollars from the settlement will be used to increase the presence of law enforcement (including immigration enforcement) around the development, among other purposes. Other settlement terms limit the sale of new plats, require certain forms of identification for sales, mandate vetting of applicants by law enforcement, and provide housing discounts for law enforcement officers. Together, these provisions appear designed to serve purposes very different from those that motivated the lawsuits at the time the complaints were filed.

Allegations: Predatory Seller Financing Aimed at Hispanic Consumers

According to the complaints, Colony Ridge allegedly lured tens of thousands of Hispanic consumers into purchasing residential lots in the Terrenos Houston subdivision using high-cost, seller-financed loans. Key allegations include that Colony Ridge targeted marketing to Hispanic consumers by advertising almost exclusively in Spanish to consumers with limited English proficiency and limited access to traditional mortgage credit. The complaints also allege that Colony Ridge provided seller-financed loans that were made without meaningful underwriting or assessment of borrowers’ ability to repay and carried high interest rates and terms that led to a high incidence of default and foreclosure. Regulators characterized Colony Ridge’s business model as one that anticipates frequent default, allowing the seller to foreclose and resell the same properties multiple times. They additionally alleged that Colony Ridge misled consumers about the habitability of the lots they were offered, some of which lacked access to basic infrastructure for utilities and were subject to frequent flooding.

The federal complaint — filed jointly by the U.S. Department of Justice (DOJ) and the Consumer Financial Protection Bureau (CFPB) in 2023 — asserts that Colony Ridge’s business practices violated the Equal Credit Opportunity Act (ECOA), Fair Housing Act (FHA), Consumer Financial Protection Act of 2010 (CFPA), and the Interstate Land Sales Full Disclosure Act (ILSA). The Texas complaint — filed in 2024 — likewise asserts violations of the CFPA and ILSA as well as the Texas Deceptive Trade Practices — Consumer Protection Act (DPTA) and Fraud in Real Estate Transactions law.

Requested Relief

Both complaints sought broad injunctive and monetary relief.

The federal complaint requested a permanent injunction (1) requiring compliance with federal law; (2) prohibiting discrimination on the basis of race and national origin in lending or housing; (3) prohibiting deceptive advertising and misrepresentations concerning utility availability, flooding, and lot habitability; and (4) requiring adequate translations and disclosures for Spanish-speaking consumers. The complaint further sought consumer redress and damages, including restitution and the option for contract recission, and requested civil monetary penalties and costs.

The state complaint similarly requested a permanent injunction (1) requiring compliance with state and federal law; (2) prohibiting deceptive advertising; (3) requiring accurate translations and disclosures; and (4) restricting misrepresentations regarding the subdivision’s property owners association (POA) and limiting how POA funds can be used. The AG also requested restitution for affected consumers, a contract recission option, and civil monetary penalties, as well as attorneys’ fees and costs.

Initially, the federal complaint also alleged that Loan Originator Services, LLC (LOS), which provided loan origination software used by Colony Ridge to generate closing documents, participated in the discriminatory conduct. In September 2024, however, the district court granted LOS’s motion to dismiss, concluding that LOS did not have a direct role in the advertising and marketing of the properties, did not decide the loan terms for consumers, and did not directly interact with consumers during closing. As a result, LOS is not a party to the proposed settlement.

The CFPB likewise is not a party to the proposed settlement because the agency voluntarily dismissed its claims on the date the settlement was announced. While the CFPB’s dismissal of its claims is consistent with the agency’s recent abandonment of other pending enforcement actions, the Colony Ridge settlement is notable in that the federal government still proceeded with the case through the DOJ.

Key Settlement Terms

If approved, the settlement would impose substantial screening, monetary, and operational requirements on Colony Ridge.

Colony Ridge would be required to adopt new eligibility and screening procedures for future lot purchasers, including identification requirements that would require purchasers to present a Texas ID or a visa or passport issued in 2025 or later. Colony Ridge would also be required to work with law enforcement officers to ensure that buyers are not on a terrorism watch list or members of a transnational criminal organization. Purchasers would have to demonstrate that they do not have a prohibited relationship with a “designated country” such as China or Iran pursuant to Texas Property Code §§ 5.251 and 5.253, which were enacted more than a year after the AG initiated litigation.

The settlement also includes several terms aimed at increasing law enforcement presence in the area, including a requirement that Colony Ridge create a discount program for peace officers to live on the properties and a mandate that the company spend $20 million to enhance law enforcement presence around the development, including immigration enforcement, among other purposes.

An additional $48 million is earmarked for infrastructure improvements around the development, such as drainage and flood control measures and infrastructure improvements to improve habitability.

Consistent with the relief originally sought, Colony Ridge would be enjoined from discriminating on the basis of race or national origin in lending and sales transactions; be required to provide certain disclosures, advertisements, and other materials in both English and Spanish; provide an option for borrowers to rescind their real estate purchase after closing; ensure that all advertisements accurately describe properties and loan terms; and implement certain POA transparency requirements, such as the provision of an annual financial report.

The settlement would also restrain future development activity, prohibiting Colony Ridge from developing new residential plats for a period of three years.

In what has been interpreted as an effort to avoid the need for judicial approval to terminate the settlement early, the agreement also includes a provision allowing the federal government and Texas to jointly terminate the agreement prior to its planned three-year sunset.

Notably, although both complaints sought restitution and other monetary relief for affected consumers, individual borrowers will not receive monetary payments under settlement. Nor will Colony Ridge pay any civil monetary penalties.

In announcing the settlement, the Texas AG’s office touted the agreement as a measure to halt illegal immigration in the state.  This emphasis marks a shift from the AG’s original announcement of the lawsuit, which characterized the case primarily as an effort to protect vulnerable Hispanic consumers from predatory lending practices in violation of Texas law. DOJ’s press release presented the settlement as protecting vulnerable borrowers while also describing the defendants as having participated in “schemes which ultimately encourage illegal immigration.”

The defendants have denied any wrongdoing.

Takeaways

For industry participants, the Colony Ridge settlement highlights several key trends:

Targeted demographic marketing is high-risk, particularly when tied to high-cost credit. Concentrating high-cost, lightly underwritten seller financing on a particular demographic group — especially using advertising in that group’s primary language — invites scrutiny under both fair-lending and consumer protection laws. Although the current administration has taken a different approach to consumer protection in such “reverse redlining” cases, enforcement risks have not disappeared entirely.

Settlements may look different than the relief initially sought. The Colony Ridge settlement underscores how different final relief may look from what regulators initially requested in litigation, particularly where there has been a change in administration in between the initiation of an enforcement action and its ultimate settlement. Defendants negotiating settlement agreements may consider offering terms that serve regulators’ policy and political goals even though those terms are at most loosely related to the underlying claims.

Injunctive relief may span beyond statutory violations invoked in litigation. The requirement that Colony Ridge comply with Texas statutes enacted more than a year after the AG initiated its enforcement action indicates that enforcers may seek to expand the scope of a settlement to cover laws not at issue in the original litigation and which are intended to serve a different purpose.

Enforcement priorities are evolving. This agreement appears to be the first fair-lending settlement during the current Trump administration. In addition to the agreement’s novel injunctive terms, the omission of civil penalties or consumer restitution is notable and reflects how the current administration may approach other fair lending cases.

Vendor and technology providers are not immune. Although LOS was ultimately dismissed as a party to the enforcement action, it is clear that technology vendors can be pulled into fair-lending and consumer protection litigation when their tools are used in allegedly discriminatory schemes.

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Troutman Pepper Locke State Attorneys General Team

	Ashley Taylor – Co-leader and Firm Vice Chair Ashley is co-leader of the firm’s nationally ranked State Attorneys General practice, vice chair of the firm, and a partner in its Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. He helps his clients navigate the complexities involved with multistate attorneys general investigations and enforcement actions, federal agency actions, and accompanying litigation.
	Clay Friedman – Co-leader Clay co-leads the firm’s State Attorneys General practice and is nationally ranked by Chambers USA for AG Government Relations and in Best Lawyers for Advertising Law. He has dedicated his entire career to state attorney general and federal work, serving for nearly a decade in a senior role and more than 25+ years in private practice. Clay focuses his practice on helping industry-leading companies mitigate the risks associated with state and federal regulatory investigations and associated litigation.
	Chris Carlson Chris advises clients on regulatory, civil, and criminal investigations and litigation. With a background as an assistant attorney general, he provides practical guidance to clients with matters involving state attorneys general and federal regulatory agencies.
	Lauren Fincher Lauren has vast experience handling state attorneys general investigations, navigating complex regulatory compliance matters, and providing strategic counsel in enforcement actions across various industries. She helps clients manage high-stakes regulatory matters and guides them through complex legal landscapes.
	Stephen Piepgrass Stephen leads the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, representing clients in single and multistate enforcement actions, including inquiries and investigations, as well as litigation involving state attorneys general and other state and federal governmental enforcement bodies. He has significant experience handling actions with federal agencies, including the CFPB and FTC, as well as single plaintiff and class action litigation for clients in highly regulated sectors such as financial services, health care, pharmaceutical, and education.
	Michael Yaghi Mike handles high-profile state attorneys general, FTC, and CFPB investigations by advising clients through these complex government inquiries. He assists clients through the entire life cycle of investigations, from regulatory enforcement through formal litigation.
	Matthew J. Berns Drawing on his experience in senior leadership roles in the New Jersey Attorney General’s and Governor’s Offices and as a trial attorney for the U.S. Department of Justice, Matt provides an insider’s perspective when guiding clients through complex government investigations, litigation, and other actions.
	Samuel E. “Gene” Fishel Gene is a former regulator with two decades of experience who has overseen state privacy and cybersecurity regulation enforcement, led national, multistate attorneys general privacy investigations, and prosecuted computer crimes at the state and federal levels. He has served at the forefront of state attorney general and federal enforcement, and utilizes this experience to proficiently represent client interests.
	Jeff Johnson Jeff helps clients navigate complex regulatory and litigation challenges with local, state, and federal authorities. His clients benefit from his decade of broad litigation experience, understanding of emerging state and federal regulatory issues, and strong relationships with attorneys general across the U.S. In addition to handling cases from trial through state or federal appeals, Jeff serves as amicus counsel in advancing legal rules to support his clients’ vital interests.
	Jay Myers Jay assists clients in heavily regulated industries, including health care, energy, insurance, emerging industries, and data privacy. He provides both regulatory legal advice and government relations strategies. Jay’s past and current clients include Fortune 10 companies, startups, nonprofits, industry associations, and advocacy groups. Recognizing that state government matters are often complex and multifaceted, he utilizes regulatory guidance, government advocacy, or both in tandem to deliver tailored solutions for each client’s unique needs.
	Zoe Schloss Zoe represents clients in litigation and government investigations. As former deputy attorney general for the Delaware Department of Justice, she is an experienced litigator who understands the enforcement priorities that impact her clients. Zoe works with individuals and corporate entities in highly regulated industries, including financial services, health care, and energy.
	Jessica Birdsong Jessica is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement Practice Group. She received her J.D. from the University of Richmond School of Law, magna cum laude, where she served as associate articles editor of the Journal of Law & Technology.
	Nick Gouverneur Nick is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement Practice Group. He received his J.D. from the University of Illinois College of Law, where he served as a member of the Journal of Law, Technology & Policy.
	Troy Homesley Troy is an accomplished litigator who has represented and defended clients across a wide range of complex, high-stakes disputes at both the trial and appellate levels. He has represented technology companies, business executives, law firms, investment funds, high-ranking federal officials, international non-profits, and asylum seekers. Troy draws on his broad litigation experience to advise clients before litigation arises, while claims are pending or threatened, and leading up to and through trial and appeals.
	Namrata Kang Namrata (Nam) is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, based in the Washington, D.C. office. She routinely advises clients on a wide variety of state and federal regulatory matters, with a particular emphasis on state consumer protection laws relating to consumer financial services and marketing and advertising. Nam’s experience transcends multiple industries, including financial services, telecommunications, media, and sports betting.
	Michael Lafleur Michael is an associate in the firm’s Regulatory Investigations, Strategy, and Enforcement Practice Group. Based out of the firm’s Boston office, Mike has deep experience in litigation, investigations, and other regulatory matters involving state-level regulators and state attorneys general.
	Philip Nickerson Philip represents clients in sectors such as financial, tech, real estate, and energy in a range of litigation matters. He is experienced in matters involving trade secrets, government investigations, commercial contracts, construction and product defect.
	Lane Page Lane specializes in federal and state regulatory investigations and complex civil litigation. He focuses on representing financial institutions and other businesses, with a particular emphasis on consumer protection and fair lending issues.
	Dascher Pasco Dascher is an attorney within the Regulatory Investigations, Strategy, and Enforcement practice, based in the Richmond office. She joined our firm after working in personal injury and medical malpractice for a Virginia trial law firm. Dascher brings varied legal experience to the firm with strong litigation and regulatory strategy capabilities.
	Kyara Rivera Rivera Kyara is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement Practice Group. She received her J.D. from the University of Richmond School of Law, cum laude, where she served as publications and online editor of the Public Interest Law Review.
	Timothy Shyu Timothy is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement Practice Group.
	Trey Smith Trey focuses his practice on representing and advising regulated utilities before state public utility commissions. He routinely helps clients obtain certificates of public convenience and necessity for transmission infrastructure. In this role, Trey works with his clients’ subject-matter experts to manage administrative proceedings, including by preparing initial filings; responding to discovery requests; drafting rebuttal testimony; and litigating any disputed issues.
	Daniel Waltz Dan helps clients navigate all aspects highly regulated relationships between industry participants and federal, state and local governments. Whether engaging with regulators, negotiating transactions or representing clients in the courtroom, he delivers solutions that help his clients achieve their strategic goals.
	Cole White Cole is a member of the firm’s Regulatory Investigations, Strategy and Enforcement (RISE) group. He has a decade of experience working in the attorney general community, having joined the firm from the Wyoming Office of the Attorney General, where he was assistant attorney general.
	Stephanie Kozol Stephanie is Troutman Pepper Locke’s senior government relations manager in the state attorneys general department.