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CFPB Staff Evaluations Show Sharp Racial Disparities

WASHINGTON Since the Consumer Financial Protection Bureau burst onto the financial stage a few years ago, it has made a steady stream of controversial moves.

None are more despised by bankers than the agency's use of statistical differences in the loan terms offered to different ethnic groups to sue creditors for unintentional racial bias.

In an ironic twist, it turns out that the CFPB's own managers have shown distinctly different patterns in how they rate employees of different races, according to confidential agency data obtained by American Banker.

Specifically, CFPB managers show a pattern of ranking white employees distinctly better than minorities in performance reviews used to grant raises and issue bonuses. Overall, whites were twice as likely in 2013 to receive the agency's top grade than were African-American or Hispanic employees, the data shows.

What's more, those disparities are only one of many serious personnel problems plaguing the CFPB. Inside the agency, morale is poor and management has been accused in several cases of favoring Caucasian men and of creating a hostile work environment. That's according to interviews with a dozen current and former staffers across six departments, all of whom requested anonymity over concerns about retaliation.

Employees have filed 115 official grievances with the National Treasury Employees Union (NTEU) since last August, the CFPB says. If unofficial complaints that haven't yet worked their way through the system are included, the number exceeds 200, according to information obtained by American Banker.

Most of the complaints pertain to allegations of unequal pay and raise questions about the recent performance reviews.

The NTEU "has identified disparities in performance ratings that appear to negatively impact non-whites and females (to some degree)," the local union said in a January email to members, which was obtained by American Banker.

CFPB spokesman Sam Gilford says the agency is still analyzing the performance evaluation data and indicated that it's preliminary and could change "depending on the outcome of pending reviews and appeals."

"The CFPB is committed to fairness and equity in the workplace as well as the marketplace," Gilford said. "Just as we often remind lenders that strong compliance management systems are critical to ensure compliance with consumer protection laws, the bureau has taken a compliance management approach in monitoring and evaluating its own performance rating process."

Stark Differences

The most concrete data available on the CFPB's employee evaluations relates to 2013. The agency rated its more than 1,100 staffers on a scale of 1 to 5 and grants greater benefits, including raises and bonuses, to those who receive higher scores.

White employees scored markedly higher than minorities. Overall, 74.6% of whites received ratings of 4 or 5, versus 65.5% of Asians, 65.2% of Hispanics and 57.6% of African-Americans, according to an internal CFPB report obtained by American Banker.

The discrepancies were even greater at the ratings range's extremes. At the top, one-fifth of white employees, or 20.7%, received a 5 and were dubbed "role models" compared with 10.5% of African-Americans and 9.1% of Hispanics.

In contrast, a relatively high proportion of minority employees received 3 ratings the lowest grade given out in large numbers. In total, a rating of 3 was given to 42.4% of African-Americans, 34.5% of Asians, 34.8% of Hispanics and 24.4% of Caucasians.

Breakdowns of employees who received 1 or 2 ratings were unavailable because they represented small slices of the agency's population likely a few dozen staff. Overall, the evaluations covered 778 white employees, 191 African-Americans, 110 Asians and 68 Hispanics. The data did not cover small groups identified as "two or more races" and "other race."

The statistics themselves do not prove that CFPB managers are discriminating intentionally against minority employees. Yet they do indicate that racial disparities can be just as easily identified within the CFPB's ranks as among the lenders the bureau regulates. The agency has pressed such claims under a controversial legal theory known as disparate impact the assertion that different results for different racial groups are themselves a type of wrongful bias, even if they are unintentional.

"The level of hypocrisy at this agency is shocking," said a current agency employee who spoke on condition of anonymity. "If it was a lender and had similar statistics, it would be written up, immediately referred to the Justice Department, sued and publicly shamed."

Added another agency employee, "If we're telling banks to own it [statistical evidence of racial bias], then why don't we own things too?"

The CFPB is likely to face pressure to answer that question as the figures circulate.

"In Washington, the hypocrisy side of this is the easiest storyline to write and the foes of the CFPB will use this as latest round of ammunition against the agency," says Edward Mills, a financial policy analyst at FBR Capital Markets. "This will certainly be something even the Democrats will have concerns about, because you don't want to lose support over personnel issues."

For its part, the bureau will likely move quickly to try to fix its personnel problems and move on, he added.

The CFPB's Gilford said the agency voluntarily collected performance evaluation data and hired an outside firm to assess it further.


(18) Comments



Comments (18)
They're not borrowers so the Fair Lending and non-discriminatory laws do not apply here. But, truly, the fox is indeed in the henhouse.
Posted by lenard_poon | Thursday, March 06 2014 at 8:13AM ET
Power corrupts, absolute power corrupts absolutely.

It would be interesting to see what this same statistical snap-shot would reveal about the financial regulators who seem to be "pearly white" as well - in mind, body and attitude.
Posted by mdillon | Thursday, March 06 2014 at 9:55AM ET
I get that morale is very low and turnover quite high at the CFPB, and that is certainly problematic. But the rest of this article is just dumb and a cheap shot at an easy target. Frankly, it smells like the American Banker is just shilling for and pandering to an industry upset at the CFPB. The fact that members of one race received better grades on their employee evaluations than members of other races does not indicate discrimination and has absolutely nothing to do with the CFPB's fair lending enforcement or disparate impact. It is, after all, possible that the employees who received higher marks deserved them, a possibility not even mentioned in the article, likely out-of-fear of being politically incorrect. The article's conclusion is reminicent of community activist who argue that HMDA data showing higher denial rates for one race is conclusive evidence of discrimination. That position, like the article's, ignores the underlying facts that might give rise to the final outcome.
Posted by uesider | Thursday, March 06 2014 at 10:06AM ET
Disparate impact in HMDA data is evidence of structural racism when you account for other variables via regression. This piece is pretty weak though, an agency that is 16% African American can hardly be compared with an industry that overages less than half that. Additionally, the CFPB workforce is diverse throughout the entire structure, unlike the financial industry which is only diverse at the lower end. I have heard there have been problems with burnout, especially in the rules writing teams but otherwise I wouldn't give too much credence to anonymous sources when we have pretty good data on the diversity of the workforce and the diversity of the banks which they regulate. There simply if no comparison, you can review the latest GAO report on the topic here. It would see that if you are writing an article on this subject you would cite relevant literature. http://www.gao.gov/assets/660/653814.pdf
Posted by editengine | Thursday, March 06 2014 at 12:26PM ET
Frankly, with a sampel this small (191 people) you can't draw much of a quantitative conclusion. This is different for larger entities like banks with can thousands of employees, but with only 1100 or so I would caution strongly against drawing any sort of conclusion when a change of ten grades can push your stats by as much as 5 points in one direction or another.
Posted by editengine | Thursday, March 06 2014 at 12:49PM ET
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