CFPB Officials Testify In Response To Allegations Of Discrimination

Posted by Patrick Barnard on May 21, 2014 No Comments
Categories : Required Reading

Officials at the Consumer Financial Protection Bureau (CFPB) testified before the House Financial Subcommittee on Oversight and Investigations on Wednesday in response to allegations of discrimination against minorities and women in the bureau.

In March, members of the oversight panel requested that the Office of Inspector General launch an investigation into alleged discriminatory practices in the bureau. The investigation was requested in response to a complaint from CFPB attorney Angela Martin, who accused the agency of gender bias, as well as an independent review conducted by Deloitte Consulting that found a pattern of higher performance marks for white employees compared with minorities.

As a result, the oversight panel requested officials from the CFPB and the employees union to testify at a hearing held April 2 – however, CFPB officials declined to attend that hearing. That resulted in the subcommittee voting to subpoena certain CFPB officials, who will now be required to testify. Additional testimony will likely be gathered at future hearings.

The Deloitte Consulting report, which was published in September 2013, shows that white, male employees in the bureau were more likely to receive positive performance ratings than minorities, women and older employees.

The CFPB has since conducted its own internal review, which revealed ‘statistically significant differences in the performance ratings’ between black and Hispanic employees compared with non-Hispanic white employees. What's more, according to the CFPB's 2013 Fiscal Performance Report, issued this month, performance reviews for employees over age 40 were ‘significantly different’ compared to those for employees under age 40, as were reviews for off-site employees compared to those working in the CFPB's main headquarters.

In the CFPB report, bureau officials claim that the disparities were not due to any single factor, but rather an overly sophisticated employee performance review system that allowed managers to create reviews using different criteria. Since January, bureau officials have been working with the National Treasury Employees Union to develop a new framework for the performance review program.

‘The performance management system implemented by the CFPB [in 2011] was based on best practices and, on paper, it had considerable merit,’ the CFPB states in the report. ‘However, in light of these findings, it is clear that the system was too sophisticated for a new agency like the CFPB, which was experiencing a high level of rapid growth and organizational pressures as it worked to build itself out starting from scratch.’

Part of the challenge, CFPB officials wrote, was that the bureau simply grew to fast.

‘In fiscal year 2012, the CFPB grew from 663 employees to 970 employees. Similarly, in fiscal year 2013, the CFPB grew from 970 employees to 1,302 employees. Throughout this time, our managers were tasked with building their offices, meeting tight timelines required for substantial statutory obligations, and delivering tangible results for American consumers. In retrospect, applying such a complicated performance management system and tying compensation to that system at such an early stage in our history was overly ambitious, even if well intentioned,’ the report states. ‘In that context, it is not surprising that, although the fiscal year 2013 performance management system included mechanisms to ensure fair and equal treatment of individual employees, it lacked policies and procedures for addressing more systemic problems in real time.’

In addition, the CFPB has announced that it will remedy any past discrimination by making adjustments to the compensation of employees who may have been affected by past practices. Bureau officials estimate the extra pay will cost between $5 million and $5.5 million.

‘We are making appropriate adjustments to past compensation to ensure that we erase the remnants of any statistical disparities that were caused by our previous management system,’ the CFPB states in its 2013 Fiscal Performance Report.

The Deloitte report suggests that the bureau's Office of Minority and Women Inclusion (OMWI), which was put in place last year, is ineffective and that CFPB leaders and employees are not clear what the OMWI actually does.

‘Out of the 31 leadership interviews Deloitte conducted, approximately 80 percent expressed that they do not understand the purpose or objectives of the OMWI office,’ the report states.

Among those testifying before the committee is Benjamin Konop, a former Lucas County Commissioner who helped organize the CFPB's chapter of the National Treasury Employees Union. As per a report on Cleveland.com, Konop told subcommittee members that ‘CFPB managers should be held accountable for faulty employee ratings and more should be done to assist workers who got the lowest ratings and to erase tainted ratings from their personnel files.

‘It appears the bureau has made a solid first step in the process of holding itself accountable,’ Konop told the subcommittee members, as per the report. ‘This is what the bureau is in the business of doing in the financial marketplace and this is all the union has asked of bureau management since our chapter's inception.’

CFPB employee relations chief Liza Strong was also reportedly scheduled to testify.

The allegations of dicrimination have received considerable coverage by the mainstream media, if not mostly because of the irony that part of the CFPB's function is to police discriminatory practices at private institutions across the financial services industry.

In related news, CFPB officials were also scheduled to testify at a House Financial Services Committee hearing on Wednesday regarding proposals to improve transparency and accountability at the bureau.

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