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Lawmakers Question CFPB’s Internal Management Practices

March 11, 2014

WASHINGTON, D.C. — After reports surfaced last week about possible racial disparities regarding the Consumer Financial Protection Bureau’s  internal management practices, three Republican members of the U.S. House of Representatives sent a letter to the CFPB last Thursday requesting records related to recent employee performance reviews.

The implications could be troublesome for the agency, which asserted last March that rate participation programs auto finance sources employ to compensate dealers creates significant fair lending risks. This past December, the agency and the U.S. Department of Justice charged Ally Financial with discrimination as a result of its dealer compensation policies. 

On March 6, House Financial Services Committee Chairman Rep. Jeb Hensarling (R-Texas) penned a letter in response to an article published by the American Banker entitled, “CFPB Staff Evaluations Show Sharp Racial Disparities.” The letter, which was signed by Rep. Shelley Moore Capito (R-W.Va.) and Rep. Patrick McHenry (R-N.C.), expressed concern over the bureau’s management practices.

According to the letter, a No FEAR Act disclosure released by the bureau for the period ending Dec. 31, 2013, showed that several bureau employees filed formal discrimination claims. Additionally, the Bureau’s 2013 Annual Employee Survey revealed that “fewer than half of bureau employees are satisfied with the policies and practices of senior leaders, that fewer than half of bureau employees agree that promotions and pay raises at the bureau are based on merit, and that fewer than three-in-five bureau employees agree that in their most recent performance appraisals, they understood what they had to do to be rated at different performance levels.”

The bureau’s employee union, NTEU Chapter 335, has stated that transparent performance evaluations are an area the CFPB needs to focus on going forward. This isn’t the first time the CFPB has faced questions about transparency. Industry experts and lawmakers alike have also questioned the bureau’s transparency with regard to the method it is using to identify discrimination in auto finance portfolios.

The three lawmakers asked that the CFPB to provide documentation no later than March 13 to fulfill 14 requests detailed in their letter. They include records depicting the distribution of employee performance ratings by demographics, as well as by office and division. The letter also requested records detailing the number of employee performance ratings that have been expunged or improved.

Additionally, the representatives asked for information on the number of complaints and grievances filed by bureau employees.

On March 7, Rep. Hensarling issued a second letter to Cordray. It asked for information related to the bureau’s investigation of auto finance. Citing previous attempts by members of Congress to obtain information about the CFPB’s investigation of discrimination in auto lending, Hensarling stated that the “bureau’s continued refusal to provide any details related to its disparate impact regression analyses and associated methodologies stands in stark contrast to your explicit promise to at least 48 members of Congress to be open and transparent in the bureau’s review of indirect auto lending.”

On Jan. 24, 2014, members of Hensarling’s staff attended a briefing on the CFPB and the U.S. Department of Justice’s settlement with Ally Financial, in which the bureau alleged that Ally engaged in an ongoing nationwide pattern of discrimination against minority car buyers. The finance source was ordered to pay $98 million to settle those claims, the largest auto loan discrimination settlement in history.  

In his letter, Hensarling said the CFPB was unwilling to answer any questions about the settlement, and that “the bureau does not plan to make the statistical analyses conducted in Ally public or otherwise release them.”

Hensarling reiterated his fellow lawmakers’ requests for information about the CFPB’s methodology for determining discrimination, as well as for specific material related to the Ally case.  

“With almost a year elapsed since members of the Financial Services Committee first sought information about the bureau’s policies on indirect auto lending, further delay in providing the committee with information needed to fulfill its oversight responsibilities is unacceptable,” Hensarling concluded. “Accordingly, if the bureau persists in its refusal to provide this information by the March 13 deadline, the committee will have no choice to consider invoking its compulsory process.”

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