Diversity and Inclusion

 

The CFPB’s Office of Minority and Women Inclusion (OMWI) has issued its annual report to Congress covering the OMWI’s activities in FY 2016.  The Dodd-Frank Act required the CFPB and various other federal agencies, including the Fed, OCC, FDIC, NCUA, and SEC, to establish an OMWI, and also requires each OMWI to submit an annual report to Congress.

From industry’s perspective, the most noteworthy task Dodd-Frank assigned to each OMWI was the development of standards to assess the diversity policies and practices relating to employment and third party contracting of the institutions regulated by the OMWI’s agency.  As the report notes, in June 2015, the CFPB and the agencies listed above jointly issued a final policy statement establishing such standards (Final Standards).  The Final Standards became effective on June 10, 2015 and envision that an entity will conduct an annual “self-assessment” of its diversity policies and practices.  Last July, the CFPB and other agencies required to establish an OMWI published a notice in the Federal Register that informed regulated entities that they could begin to submit self-assessments of their diversity policies and practices to the Director of the OMWI of their primary federal financial regulator.

In its report, the OMWI states that in 2016, it “continued the planning needed for initiatives related to the new standards.”  The planning work included creating a self-assessment tool that will be offered to entities to assess their diversity and inclusion policy and practices.  The report indicates that the CFPB hosted “an initial roundtable listening session” in November 2016 with mortgage industry members to learn more about their experiences, practices and challenges with diversity and inclusion management practices.

Another task of an OMWI is to develop standards for creating diversity in an agency’s own workforce and increasing participation of minority-owned and women-owned businesses in the agency’s programs and contracts.  According to the report, the CFPB had a workforce of 1633 employees in 2016 (representing an increase of 124 employees from 2015), of whom almost 49% were female and 51% were male.  (The percentage of women represents about a 1% increase from 2015’s percentage.)  In addition, of those employees, approximately 62.3% self-identified as White, 19.8% as Black/African-American, 5.8% as Hispanic, 8.7% as Asian American, and 3.2% as another racial group or belonging to two or more racial groups.  The report indicates that this represents a slight increase of 1.81% in the percentage of minority employees in 2016 from 2015, with a corresponding slight decrease in white employees.

With regard to procurement, the report indicates that in FY 2016, the CFPB entered into “contract actions” totaling approximately $190.0 million.  Of the total contract dollars awarded in FY 2016, the report states that 8.75% went to women-owned businesses and 17.50% went to minority-owned businesses (consisting of businesses owned by Hispanic Americans, African-Americans, Asian/Pacific Islander Americans and American Indians/Alaskan Natives and “Others”).

As noted above, the Final Standards cover not only a regulated entity’s diversity policies and practices relating to employment, but also cover its procurement and business practices.  Thus, banks and other regulated entities may want to take note of the section of the report describing the CFPB’s efforts to increase vendor diversity.  Such efforts include participating in procurement events and conducting other outreach targeted at establishing connections and recruiting diverse suppliers.

In addition to its annual OMWI report, the CFPB also issued its Equal Employment Opportunity (EEO) program status report for FY 2016 and its Notification and Federal Employee Antidiscrimination and Retaliation Act of 2002 (No FEAR Act) Annual Report for FY 2016 

Pursuant to a directive of the Equal Employment Opportunity Commission, a federal agency must submit an annual report that evaluates whether the agency is establishing and maintaining effective programs of equal employment opportunity under Title VII of the Civil Rights Act of 1964 and the Rehabilitation Act of 1973.  The CFPB’s EEO program status report includes a description of the CFPB’s EEO program activities, a description of  internal assessments conducted by the CFPB to identify and prevent barriers to employment in the workplace, a plan regarding future steps to correct deficiencies or improve the EEO program, and data regarding the race, national origin, gender, and disability status of the CFPB’s workforce.

The CFPB’s No FEAR Act annual report includes data regarding complaints filed against the CFPB involving federal laws covered by the No Fear Act, which include Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, and the Equal Pay Act of 1963.

Ballard Spahr’s Diversity Team advises clients on the design and implementation of diversity and inclusion programs and counsels regulated entities on developing and implementing diversity programs.

 

 

The CFPB released two items at year-end:  the results of its 2016 annual employee survey and its updated Diversity and Inclusion Strategic Plan (Strategic Plan) for 2016-2020.

Survey.  Of the 1,567 CFPB employees surveyed, 1,372 (almost 87.6%) responded to the 2016 survey.  We were pleased to see that the survey results appear to show that the CFPB has made progress in improving  its work environment.  In particular, in response to the question “what progress has the CFPB made in creating a workforce experience where everyone feels included, valued and empowered to do their best work,” 88.4% of the respondents found that the CFPB had made some degree of progress, ranging from “goal achieved” to “limited progress,” and of those respondents, 63% found that either “substantial progress” or “some progress” had been made.

Strategic Plan.  The plan takes guidance from Section 342 of the Dodd-Frank Act and other federal initiatives and regulations focused on advancing diversity and inclusion.  As released in November 2015, the plan was built around five pillars: workforce diversity, workforce inclusion, sustainability, minority- and women-owned businesses, and the transparency of diversity practices of regulated entities.

The updated plan adds a sixth pillar: employment practices of CFPB contractors.  The plan states that through its Office of Minority and Women Inclusion, the CFPB will “use good faith effort (GFE) standards developed under Dodd-Frank Act to determine efforts of Bureau contractors to utilize women and minorities in their workforces.”

The final diversity and inclusion standards adopted by the CFPB, the federal banking agencies and other federal agencies in June 2015 include standards directed at the promotion of contractor diversity by regulated entities.  However, those standards emphasize increased outreach to minority-owned and women-owned businesses.  The Strategic Plan takes a broad view of the standards to address not only the diversity of the owners of CFPB contractors but also the diversity of a contractor’s workforce.  The addition of this sixth pillar is likely an indication that the CFPB expects regulated entities to similarly consider not only the ownership of their contractors but also their contractors’ efforts “to utilize women and minorities in their workforces.”

Ballard Spahr’s Diversity Team advises clients on the design and implementation of diversity and inclusion programs and counsels CFPB-supervised entities on developing and implementing diversity programs.

Women in the real estate financing sector have a new opportunity to connect with others in their field and to access and exchange information about the industry.  On October 18, the Mortgage Bankers Association (MBA) announced the launch of mPower, a professional networking platform that aims to create “a strong, diverse network of women” in the real estate financial industry.  In addition to the benefits for women, financial services entities subject to regulation under the Dodd-Frank Act can look to the new MBA networking platform as an initiative for fostering diverse talent in connection with diversity and inclusion (D&I) programs adopted under the Dodd-Frank D&I standards.

mPower, an acronym for MBA Promoting Opportunities for Women to Extend their Reach, is accessible through the MBA website, where members are provided with exclusive access to resources and information, notices regarding upcoming events of interest to women in the industry, and the opportunity to interact with their peers in a private online forum.  According to David H. Stevens, president and CEO of the MBA, “addressing the needs of this important segment of our workforce is essential to our industry’s success.  MBA can be the catalyst for creating a strong, diverse network of women in our industry.”

The stated goals of mPower align with the Dodd-Frank D&I standards, which contemplate the “inclusion” component as “a process to create and maintain a positive work environment that values individual similarities and differences, so that all can reach their potential and maximize their contributions to an organization.”  As explained by MBA chief operating officer Marcia Davis, “mPower is designed to recognize and promote the rise of women in the real estate finance industry, as well as the overall workforce.  Our goal is to provide information, events and a networking platform to help women maximize their overall potential.”

 

Members of Ballard Spahr’s Consumer Financial Services group recently participated in the American Bar Association Business Law Section Annual Meeting held in Boston, Massachusetts.  On September 8, Ballard partner, Dee Spagnuolo, joined Director Stuart Ishimaru of the CFPB’s Office of Minority and Women Inclusion, and other industry leaders for a panel discussion entitled, “Diversity and Dodd-Frank Section 342.”

The program included an informative discussion of the history of Section 342 of the Dodd-Frank Act, examined its effect on the industry, and provided guidance on how regulated entities might best comply with the Joint Diversity Standards issued in June 2015.

As part of his remarks, Director Ishimaru emphasized that, while the Standards themselves are not mandatory, regulated entities should follow their guidance because diversity and inclusion (D&I) policies and practices make “business sense.”  The Director noted that in an increasingly diverse world, D&I initiatives open opportunities in new markets and provide exposure to innovation and diversity of thought.  With respect to organizational commitment to D&I, the Director encouraged the leadership at regulated entities to play an integral role in articulating and advancing their organizations’ D&I plans.

The panel also engaged in a thoughtful discussion about transparency with respect to a regulated entity’s successes and challenges in promoting D&I.  Ms. Spagnuolo noted that annual reports submitted to regulators, such as the CFPB, may be subject to production under the Freedom of Information Act (FOIA).  Director Ishimaru expressed the view that FOIA should not deter an organization from sharing its annual reports with regulators because such reports are accessible through other means, such as discovery requests in litigation.  The Director invited regulated entities to be more transparent about their D&I efforts and to increase communication with regulators, with their communities, and with their own workforce.

Finally, with respect to the definition of “diversity” set forth in the Joint Standards, which focuses on minorities and women, several panelists encouraged regulated entities to use a broader definition of “diversity” to include, for example, veterans, LGBT, or people with disabilities.  The Director concurred with that advice, but reminded entities to ensure that the representation of minorities and women is not lost in more expansive programs.

Ballard Spahr’s Diversity Team advises clients on the design and implementation of diversity and inclusion programs.

 

On June 29, 2016, BancorpSouth Bank announced a proposed settlement and consent order with the CFPB and the U.S. Department of Justice of charges that the bank’s mortgage lending practices violated the Equal Credit Opportunity Act and Fair Housing Act by redlining majority-minority neighborhoods in the Memphis MSA and illegally discriminating against African Americans in the underwriting and pricing of certain mortgage loans.  The charges stemmed from what the CFPB characterized as its first use of testers or “mystery shoppers” posing as consumers to support discrimination charges.  Another unique aspect of the case is that the consent order, if approved, will require the Bank to adopt or revise diversity policies and practices as part of a written compliance plan to ensure that it does not engage in discrimination.

Under the consent order, the Bank agreed to engage a third-party compliance management system consultant to assist in the review and revision of its fair lending management system.  The consultant will conduct a detailed assessment, including a review of the Bank’s diversity policies and practices in the Memphis MSA.  This aspect of the assessment appears to parallel the Dodd-Frank Act diversity standards which call for regulated entities to conduct an annual self-assessment of their diversity policies and practices in four areas: (1) organizational commitment to diversity and inclusion, (2) workforce and employment practices, (3) procurement and business practices, and (4) practices to promote the transparency of organizational diversity and inclusion.

The consent order further will require the Bank to submit a written compliance plan which must include adoption or revision of its diversity policies and practices, as informed by the consultant’s findings.  The consent order also touches upon several recognized diversity and inclusion practices, including that the Bank must conduct fair lending training for covered employees with an implicit racial bias component and that the Bank must develop or expand community partnerships designed to enhance financial education around credit, homeownership, and foreclosure prevention.

Ballard Spahr’s Diversity Team is working with numerous financial institutions and publicly traded companies to undertake self assessments in the diversity and inclusion arena and to adopt measures in conjunction with the Dodd-Frank Act diversity standards.  On July 26, 2016, Ballard Spahr attorneys conducted a webinar on the BancorpSouth Bank consent order: “Fair Lending Lessons That Go Beyond Mortgages – The BancorpSouth Bank Consent Order.”  Last July, Ballard Spahr attorneys conducted a webinar on the Dodd-Frank Act diversity standards: “Complying with the Final Diversity and Inclusion Standards.”

 

In a notice to be published in tomorrow’s Federal Register, the CFPB, OCC, Fed, FDIC, SEC, and NCUA announce that the Office of Management and Budget has approved the “information collection” contained in their “Final Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies.”  The Policy Statement, which implemented Dodd-Frank Section 342, became effective upon its publication in the Federal Register on June 10, 2015.  The notice informs regulated entities that they may now begin to submit self-assessments of their diversity policies and practices to the Director of the Office of Minority and Women Inclusion of their primary federal financial regulator.

The final standards envision that an entity will conduct an annual “self-assessment” of its diversity policies and practices in four areas: (1) organizational commitment to diversity and inclusion, (2) workforce and employment practices, (3) procurement and business practices, and (4) practices to promote the transparency of organizational diversity and inclusion.  The standards provide for “assessment factors” for each of these areas, encouraging entities to allocate time and resources to monitor and evaluate their performance under their diversity policies and practices on an ongoing basis.  The standards also contemplate that a regulated entity will disclose certain information relating to its diversity and inclusion efforts on its website or in other appropriate communications, and will provide to its primary federal financial regulator information relating to its self-assessment.

In conjunction with the issuance of the final standards, the agencies had published a 60-day notice requesting comments on the information collection process and parameters, and how this requirement might affect regulated entities.  The notice addressed the comments received during the 60-day comment period which included concerns about agency disclosure of confidential information contained in a self-assessment.  In response, the agencies offered no assurances that the information would remain confidential, stating simply, “To the extent that a submission includes confidential information, the Agencies will keep such information confidential to the extent allowed by law.”

Ballard Spahr’s Diversity Team is working with several clients on developing and implementing diversity programs.

 

 

The CFPB’s Office of Minority and Women Inclusion (OMWI) has issued its third annual report to Congress covering the OMWI’s activities in 2015.  The Dodd-Frank Act required the CFPB and various other federal agencies, including the Fed, OCC, FDIC, NCUA, and SEC, to establish an OMWI, and also required each OMWI to submit an annual report to Congress.

From industry’s perspective, the most noteworthy task Dodd-Frank assigned to each OMWI was the development of standards to assess the diversity policies and practices relating to employment and third party contracting of the institutions regulated by the OMWI’s agency.  As the report indicates, in June 2015, the CFPB and the agencies listed above jointly issued a final policy statement establishing such standards (Final Standards).  The Final Standards became effective on June 10, 2015.

The Final Standards envision that an entity will conduct an annual “self-assessment” of its diversity policies and practices in four areas: (1) organizational commitment to diversity and inclusion, (2) workforce and employment practices, (3) procurement and business practices, and (4) practices to promote the transparency of organizational diversity and inclusion.  The Final Standards provide for “assessment factors” for each of these areas, encouraging entities to allocate time and resources to monitor and evaluate their performance under their diversity policies and practices on an ongoing basis. In its report, the OMWI states that it “has begun work on plans related to the new standards including creating processes and procedures for entities to voluntarily assess and report on their internal diversity and inclusion.”

Another task of an OMWI is to develop standards for creating diversity in an agency’s own workforce and increasing participation of minority-owned and women-owned businesses in the agency’s programs and contracts.  According to the report, as of year-end 2015, the CFPB had 1,507 employees, representing an increase of 283 employees from year-end 2014.  Of the 1,507 employees, 48% were female and 52% were male.  (The percentage of women represents a 2% increase from 2014’s percentage.)  In addition, of those employees, 68% self-identified as White, 20% as Black/African-American, 9% as Asian American, and 3% as another racial group or belonging to two or more racial groups.  The report notes that as of the end of 2015,  minorities and women held, respectively, about 26% and 41% of the CFPB’s executive leadership positions.

With regard to procurement, the report indicates that in FY 2015, the CFPB entered into 1,450 “contract actions,” totaling approximately $244.0 million.  Of the total contract dollars awarded in FY 2015, the report states that 5% went to women-owned businesses and 9% went to minority-owned businesses (consisting of businesses owned by Hispanic Americans, African-Americans, Asian/Pacific Islander Americans and American Indians/Alaskan Natives and “Others”).

As noted above, the Final Standards cover not only a regulated entity’s diversity policies and practices relating to employment but also cover its procurement and business practices.  Thus, banks and other regulated entities may want to take note of the section of the report describing the CFPB’s efforts to increase vendor diversity.

Ballard Spahr’s Diversity Team advises clients on the design and implementation of diversity and inclusion programs and counsels CFPB-supervised entities on developing and implementing diversity programs.

 

 

Regulated entities should be aware of two recent developments concerning the final diversity and inclusion standards issued this summer under Dodd-Frank Section 342 by the CFPB, OCC, Fed, FDIC, NCUA and SEC.  Given that the final standards have been in effect since June 10, 2015, entities should begin taking steps to incorporate them into their daily business practices and plan for their self-assessments.

The first development was the CFPB’s release of its Diversity and Inclusion Strategic Plan for 2016-2020.  The plan sets forth the CFPB’s diversity and inclusion vision statement and describes how the CFPB will promote diversity and inclusion in the workforce and with its suppliers, as well as assess and strengthen diversity and inclusion within its regulated entities. The CFPB expects such entities to take similar steps within their organizations.

The second development is a joint notice, request for comment, and notice of information collection published in the Federal Register on November 6, 2015 by the six agencies that issued the final diversity and inclusion standards.  In conjunction with the issuance of the final standards, the agencies had published a 60-day notice requesting public comments on the information collection process and parameters, and how this requirement might affect the regulated entities.  The Notice addresses the four comments received during the 60-day comment period, and invites additional comments on the collection of information.  Comments are due by December 7, 2015.

For more information about these developments, see our legal alert.

 

On March 3, 2015, the World Bank Group announced the creation of an External Advisory Panel (Panel) for Diversity & Inclusion. This announcement comes on the heels of the newly released diversity Standards, developed pursuant to the Dodd-Frank Act, which are applicable to regulated entities, including financial institutions doing business in the United States. World Bank’s announcement, while not linked directly to the new Standards, states that the Panel is intended to provide a conduit to the global community and to serve as a sounding board for advice on matters relating to diversity and inclusion. The press release is available here.

The Panel will advise World Bank President Jim Yong Kim and his senior management team on strategies to achieve a diverse and inclusive workplace; provide guidance on how to address challenges affecting WBG’s diversity and inclusion efforts; and add an external perspective to enhance the strategies and views of the WBG’s internal Council on Diversity and Inclusion.

The following six individuals were selected to be members of the inaugural Panel based on their on their commitment and contributions to diversity and inclusion in their organizations and/or the broader community: Elizabeth Adu, Former World Bank Group Director and Deputy General Counsel; Richard Bernal, Counselor for Jamaica, Inter-American Development Bank; Julius Coles, Director, Andrew Young Center for Global Leadership, Morehouse College; Indra K. Nooyi, Chairman and Chief Executive Officer, PepsiCo.; Paula Yacoubian, CEO of Integrated Communications; and Kenji Yoshino, Chief Justice Earl Warren Professor of Constitutional Law, New York University.

On August 12, 2015, Dee Spagnuolo, a Ballard Spahr partner, will be a faculty member at an American Bar Association webinar: “Dodd-Frank: Implications for Your Diversity and Inclusion Program.”  The program will focus on how Dodd-Frank Section 342 impacts regulated entities, including financial institutions and publicly traded companies, and include a discussion of best practices for compliance.

New Diversity and Inclusion Standards jointly issued by six federal agencies pursuant to
Section 342 went into effect on June 10, 2015.  The Standards apply to all entities regulated by any one of the federal agencies subject to Dodd-Frank.  Thus, the entities affected do not just include financial institutions, but any publicly traded company, mortgage company, and any other entity regulated by one of the six agencies, including all of the federal banking agencies and the CFPB.

A link to register is available here.