Recently it has been revealed that the Consumer Financial Protection Bureau (CFPB) has a disparate treatment problem. CFPB managers have rated white staff members distinctly better than minority staff members in staff reviews that are used, in addition to other purposes, for determining raises and bonuses. The evidence against the CFPB appears solid.
The manner in which the CFPB has responded to this embarrassing mess holds lessons for any bank subject to charges of disparate impact in hiring, lending, or other matters. Following are quotes from Richard Cordray or from the CFPB report on this matter, entitled “Growing Pains.”
- Cordray: Just as we believe diversity makes good sense in the industries we regulate, we are equally committed to holding ourselves to the highest standards of inclusion and fairness.
- Cordray: Creating a diverse and inclusive culture at the same time that we are building an agency is challenging.
- Growing Pains: The challenge and opportunity of creating a federal agency from the ground up… has come with its own series of growing pains and opportunities for improvement, most recently in the Bureau’s performance management system.
- Growing Pains: The CFPB has engaged a third-party firm to do a comprehensive review. The firm will look at a range of possible root causes for the observed differences and analyze what potential effect the ratings process may have had on CFPB employees.
- Growing Pains: We are fully committed to making sure that our talented and our diverse staff are treated fairly and with the respect they deserve, and we hold the Bureau to the standards of fairness that we expect of the companies and industries it regulates.
Lessons for the industry – When caught in a serious violation consider using the CFPB template to make the problem go away:
- Make sincere sounding proclamations regarding your commitment to assure compliance.
- Make excuses, such as “We were challenged by implementing thousands of pages of Dodd-Frank Act regulations at the same time we were trying to operate a financial institution.”
- Spend money hiring a consultant to conduct a review of the root causes of the problem and analyze the impact on your customers.
- Make promises regarding the great things you intend to do in the future to assure compliance.
It appears that the CFPB believes its actions and promises are sufficient to eliminate this problem. Time will tell whether the House Financial Services Subcommittee on Oversight and Investigations will consider taking action in response to the allegations against the CFPB.
While it would be nice if following the CFPB template would eliminate liability for fair lending and other violations, we suspect the regulatory response to the template would be to laugh in your face.