Rapid Buildup of CFPB Led to Employee Allegations of Bias: Cordray Consumer Financial Protection Bureau Director Richard Cordray told House lawmakers on Wednesday that allegations of discrimination and retaliation among agency employees were due to its efforts to rapidly build itself up following its creation three years ago.
WASHINGTON Consumer Financial Protection Bureau Director Richard Cordray told House lawmakers on Wednesday that allegations of discrimination and retaliation among agency employees were a result of efforts to rapidly build itself up following its creation three years ago.
In his first testimony exclusively focused on alleged racial disparities uncovered in the agency's employee performance reviews, Cordray said the CFPB struggled with its culture because it grew too fast, largely in an effort to meet mandates of the Dodd-Frank Act.
"Because of the speed with which we tried to build this new agency, we have found that we did not get everything right for our own employees. One especially sore spot was the system for reviewing and assessing the performance of CFPB employees," said Cordray in testimony before the House Financial Services' subcommittee on oversight and investigations. "During the second year we had that system, we heard complaints and concerns from employees about it. ... Notably, about half of our employee grievances filed to date have concerned performance reviews."
The hearing was spurred after American Banker revealed in March that a CFPB internal report identified racial disparities in employee performance reviews. Since then, two current and one former employee have testified before the subcommittee alleging discrimination and retaliation by management.
The agency has also taken several steps in an attempt to address the problem, including scrapping its review process and remediating $5 million to affected employees. But Republican lawmakers said those moves were not sufficient.
"Accountability is critical to leadership, and I look forward to Director Cordray specifying actions that he has taken to reprimand and terminate managers who have wrongfully treated and retaliated against CFPB employees," said Rep. Patrick McHenry, the chairman of the subcommittee. "Managers have unequivocal free reign, resulting in a toxic management culture that lacks accountability and trust. Employees fear speaking out, and they fear asserting their rights, lest they suffer reprisals and retaliation. This must change."
Over the course of several reports, both internally and independently conducted, the CFPB has acknowledged that there were statistically significant disparities among employee reviews related to race and age, among other things.
Cordray said that the CFPB detected the problems and is making strides to fix them.
"By self-correcting and self-remediating disparities in our performance ratings, we are holding ourselves to the same standards of fairness that we expect from the financial industries we oversee," Cordray said. "Although the bureau has had good diversity numbers around hiring and contracting, we need to focus more consciously on how to improve our culture, so that diversity and inclusion are more deeply ingrained in our everyday work life."
Cordray said that the agency would move to a more simplified two-level performance system during the next two years until the union and management can agree to a new system. The agency has also been conducting "listening sessions" with employees through its Office of Office of Minority and Women Inclusion.
"Hundreds of our colleagues have participated in these sessions and we are listening closely to learn more about how to set a better direction for the future and to achieve some of the goals that I have touched on here today," Cordray said.
Still, Republican lawmakers said the subcommittee has now heard from 32 employees at the agency. GOP members pressed Cordray to directly reprimand managers who were tied to such allegations in an effort help change the culture at the agency.
"Changing employee ratings, topping off pay, hiring consultants, and holding listening sessions around the office does nothing to hold your managers accountable, and so they are wholly inadequate," McHenry said. "I'm not interested in hearing about the bureaucratic ways the Bureau is papering over the real problem. We need action. We need results."
Some managers named by employees in previous hearings have changed positions this year, but officials said it was not tied to employee charges. Cordray said during the hearing that they have also "made management structural changes at bureau" to address the agency's culture.
McHenry said the Government Accountability Office has agreed to look into the matter after he, along with House Financial Services Chairman Jeb Hensarling and Rep. Shelley Moore Capito, made the request. Top Democrats on the committee have also requested that the inspector generals of all the federal financial agencies look into the employee practices and policies. Democrats have pressed Republicans to hold all agencies accountable to the same standard as they seem to be holding the CFPB.
The subcommittee's ranking member, Rep. Al Green, D-Tex., said Wednesday that the committee should look into allegations of gender discrimination at financial companies, including Goldman Sachs.
This is "bigger than the CFPB. It's about insidious discrimination wherever it happens to be, not just at the CFPB," Green said. "I just believe that what's good for the regulator is good for the regulated."