WASHINGTON House lawmakers on Wednesday sharply questioned the speed of the Consumer Financial Protection Bureau's response to problems with its employee ratings system after discovering that a consulting firm identified disparities based on race, age and gender nearly eight months ago.
The agency commissioned Deloitte to examine its diversity process last year, with the results which backed up concerns by employees that the evaluation system was unfair delivered to its diversity office in September
Yet some lawmakers say it appears the CFPB did not acknowledge problems with the system until March, after the American Banker published a story revealing the contents of a later internal agency analysis that also claimed there were racial disparities present in employee evaluations.
"Why did the CFPB continue to defend its performance ratings system when it had such a damming report from a revered consulting firm?" asked Rep. Patrick McHenry, the chairman of the House Financial Services oversight subcommittee, who noted the Deloitte report publicly for the first time.
During a hearing, the panel's second examining allegations of discrimination and retaliation by CFPB management, lawmakers questioned CFPB officials who were compelled to testify by a subpoena after the agency declined to make them available. Both of them said they were not aware of the report, which provoked skepticism from some Republicans on the panel.
In a string of heated debates, lawmakers repeatedly questioned Liza Strong, director of the CFPB's employee relations unit, who said she "vaguely remembered" being interviewed for the report but was not made aware of its conclusions.
In an e-mailed statement after the hearing, Jen Howard, a spokeswoman for the CFPB, said that the Deloitte report was not commissioned by Strong's division, but instead by the Office of Minority and Women Inclusion on behalf of its assistant director, Stuart Ishimaru. Howard said the subcommittee had refused to let Ishimaru testify about the report.
Ishimaru "intended the study to provide broad first look at a variety of diversity and inclusion issues to inform his office priorities. The senior leadership was briefed on the report in late November," said Howard. "Two months after Director [Richard] Cordray was briefed on the Deloitte report, and the same month he received the initial bureau analysis, he directed the bargaining team to work with the union to move toward a new performance ratings system. He also ordered additional analysis at the same time to better understand the data and potential problems."
The 90-page Deloitte report identified several issues, including a lack of women and minorities in the higher pay salary bands and a lack of diversity training by supervisors. It also questioned why Asian and white employees were hired at double the rate of other races. Additionally, it emphasized key areas where the agency was missing data, including raw data on exit interviews, to perform a more thorough analysis.
"Employees indicated that bureau level data reflects a sense of 'false diversity,' or a greater level of workforce diversity than the level of diversity experienced on a day-to-day basis at the division levels," said the Deloitte report. "Supervisors are the single most important group that shape the work environment and to date, CFPB has not offered consistent D&I [diversity and inclusion] training on how they can engage with their teams to maximize cognitive diversity to drive innovation."
The Deloitte report appears to be the earliest confirmation of a systemic problem with its employee evaluation system but it was not the last. A second internal report in January concluded that whites were more likely to be rated better than Hispanic and African-American employees.
The agency released a third report on Monday that found statistically significant disparities based on race, age, location, and whether the employee was part of the union. As a result, the CFPB said it was scrapping the evaluation system and remediating at least $5 million to affected employees.
"This week, we announced that we are remediating all employees harmed by the problems with the performance ratings system. By self-identifying and self-correcting these issues, we are holding ourselves accountable to the same standards of fairness that we expect of our regulated entities," the CFPB's Howard said. "Our determination to resolve these issues appropriately is motivated by our acknowledgement that our employees deserve to expect the highest standards."
But during the hearing, Ben Konop, the executive vice president for the local National Treasury Employees Union chapter of the CFPB, said that CFPB management did not start backing away from its rating system until after problems with it became public.
"Management refused to acknowledge the documented unfairness in the system and, instead, defended PMR [performance reviews]," he said. "In fact, at one point during negotiations, a management representative asked me unironically whether, by advocating for a new rating system, I 'did not believe in a meritocracy.'"
He said that the March 6 American Banker story "certainly softened them up."
The agency did not tell employees or the public that it was considering changing its employee evaluation system until after the initial story ran. Konop said that had he known about the Deloitte report earlier, it may have helped the union during negotiations.
"This report would have certainly informed our negotiation in 2013 over pay and informed our negotiations this year over pay and [the performance review] system, and also our informal grievance process," he said.
Following the hearing, the NTEU issued a statement appearing to distance itself from the opinions of Konop. The national president, Colleen M. Kelley, said she "remains baffled" why the subcommittee subpoenaed Konop after both herself and the local chapter president agreed to testify.
"The chairman indicated that Ben Konop, NTEU Chapter 335 executive vice president, had specific information that was important to the hearing but clearly that was not the case," Kelley said. "Since we began representing CFPB employees, the union brought these concerns to the attention of management and has been working diligently on these issues . The union's work is evident in the announcement this week by Director Richard Cordray."
During the hearing, Democrats continued to press the subcommittee to look more broadly at how disparities can crop up at any government agency. They suggested that Republicans were focusing on the CFPB's issues because of long-standing ideological objections to the agency.
"This is our opportunity to make sure that we treat this agency and all agencies the same way so when we move on, Mr. Chairman, and we find that there are complaints at some other agency, we will have the same desire to investigate that we have with CFPB," said Rep. Al Green, the lead Democrat on the panel. "I'm going to quote Marvin Gaye. His words were 'let's get it on.' So Mr. Chairman, let's get it on. Let's get to the bottom of it and let's not let this be the last time that this committee embraces the notion that we are trying to deal with and eliminate discrimination."
Although Republicans have pledged to look beyond the CFPB, some also argued that the issues present at the young agency appear to be unusual.
"All government agencies including the CFPB must continue to combat discrimination by employees and formally punish those responsible for discrimination," McHenry said. "And yet, during my time in Congress I've never witnessed this much of an outpouring from employees or actually any agency across the government in terms of the number of employees we've seen and calls we've had."
Konop acknowledged that the most recent actions taken by the agency to address the disparities are a "productive first step" but more needed to be done, such as holding managers accountable.
"Director Cordray's memorandum is a good step forward. But we still have pay equity issues that have not been addressed that affect dozens of women and minorities at the bureau and I think the union needs to ensure that there's accountability for managers who make mistakes," he said. Management is "taking it seriously. I don't think they would even acknowledge that they have a full plan. I think that's part of what our working group is trying to achieve."