Did the CFPB Fail its Own “Disparate Impact” Test?

Thomas Brown, writing on bankstocks.com, reports the Consumer Financial Protection Bureau (CFPB) has jettisoned its personnel review board because on a 1-5 scale whites outscored Latinos who outscored blacks, so it will solve the inequality by paying everyone as a five. As Brown says, “This is no way to run an organization. It’s an issue of simple equity. ‘By self-identifying and self-correcting these (performance review disparities),’ CFPB head Richard Cordray told American Banker, ‘we are holding ourselves accountable to the same standards of fairness that we expect of our regulated entities.’ No. Treating the agency’s highest-rated employees the same as its lowest-rated ones is the opposite of fairness. Hard-working, conscientious workers (and, yes, the federal government does have those) deserve to be treated better and paid more than workers who, say, persistently show up late and turn in shoddy work.”

The CFPB intends to regulate banks on the very same issue of “disparate impact” in order to prevent discrimination in lending. He says, “The agency shouldn’t rely on disparate impact as a sign lenders deliberately discriminate against minority borrowers. If it does, then banks, to stay on the safe side, will likely respond by making credit less available to all borrowers. Who does that help?” MHProNews.com has learned Cordray set a standard of performance he was unable to attain in his agency so he abandoned it.

Thomas Brown is a long-time bank analyst who operates a hedge fund of financial services firms. ##

(Image credit: Steve Rhodes/getoutofdebt.org)

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