Regulated entities should be aware of two recent developments following the release of the Final Diversity Standards under Section 342 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), which went into effect on June 10, 2015.

The first is the Consumer Financial Protection Bureau’s (CFPB or Bureau) Diversity and Inclusion Strategic Plan (Strategic Plan), which sets forth the CFPB’s diversity and inclusion vision statement and details on 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 (collectively, Notice) submitted by six agencies relating to the collection of information under Dodd-Frank. The information collection requirement applies to not just financial institutions, but any publicly traded company, mortgage company, and any other entity regulated by one of the six agencies. The Notice addresses the four comments received during the 60-day comment period, and invites additional comments on the collection of information.

Diversity and Inclusion Vision Statement and Definition 

To guide the Bureau’s vision for diversity and inclusion in the workforce, the CFPB developed a diversity and inclusion vision statement. The statement provides that the CFPB values “diversity and inclusion and drive[s] innovation by leveraging the talents and perspectives of the CFPB’s diverse workforce and stakeholders to best protect the financial interests of all consumers.”

The Strategic Plan defines “diversity” to mean “the range of differences including backgrounds, identities (including but not limited to, race, ethnicity, age, sexual orientation, disability, gender, gender identity, religion, disability, and sex), perspectives, and working styles that employees and stakeholders bring to the CFPB to better serve consumers.” This definition is much broader than that used in the Final Standards, which focuses on minorities (African Americans, Native Americans, Hispanic Americans, and Asian Americans) and women. 

The CFPB’s definition of “inclusion” also differs slightly from that in the Final Standards. Specifically, the CFPB defines inclusion as “the process of fostering a collaborative, flexible, and fair environment where all employees feel valued and empowered to share their views and ideas to inform the CFPB’s work, and which allows us to leverage the broad talents of our diverse workforce.” By comparison, the Final Standards define inclusion to mean “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.”

Five Pillars of the Strategic Plan

Taking guidance from Section 342 of the Dodd-Frank Act and other federal initiatives and regulations focused on advancing diversity and inclusion, the Strategic Plan is built around five pillars—workforce diversity, workforce inclusion, sustainability, minority- and women-owned businesses, and the transparency of diversity practices of regulated entities. Each goal contains specific priorities and action items designed to promote diversity and inclusion as highlighted below.

Workforce Diversity 

To promote workforce diversity, the CFPB will recruit from a diverse, qualified group of potential applicants to develop a high-performing workforce drawn from all segments of American society. The CFPB will obtain and analyze applicant flow data for the CFPB workforce to inform and guide recruitment and selection, and to develop an integrated CFPB-wide approach for outreach and recruitment that identifies diverse sources of potential candidates. The CFPB will also use strategic hiring initiatives for people with disabilities and for veterans, and will conduct barrier analysis under the EEOC’s Management Directive 715 and supporting Special Emphasis Programs to promote diversity within the workforce.

Workplace Inclusion

To foster workplace inclusion, the CFPB will cultivate a culture that encourages collaboration, flexibility, and fairness to enable individuals to contribute to their full potential and to promote workforce retention. The CFPB will focus on promoting diversity and inclusion in leadership development programs and cultivating a supporting, welcoming, inclusive, and fair work environment. 

Sustainability

To achieve a sustainable workplace culture of diversity and inclusion, the CFPB will develop strategies and processes to equip leaders with the ability to manage diversity, articulate expectations for accountability, measure results, and adjust and refine approaches on the basis of collected data. Areas of focus will include ensuring full and timely compliance with federal laws, directives, and policies related to promoting diversity and inclusion in the federal workforce by developing a diversity and inclusion dashboard with metrics as a management tool for planning and reporting. Finally, the CFPB will create its own employee working group to gain the employees’ perspective and feedback on diversity and inclusion.

Minority- and Women-Owned Businesses

             

The CFPB will increase opportunities for minority-owned and women-owned businesses by educating business unit leaders in the CFPB about benefits of contracting with such businesses and performing outreach to potential minority- and women-owned vendors.

 

Diversity Practices of Regulated Entities

The CFPB’s Office of Minority and Women Inclusion will use the Final Standards to assess the diversity and inclusion policies and practices of regulated entities, encourage increased levels of diversity and inclusion, and share information with the public and the Bureau.

New Notice and Comment Period for Collection of Information

As previously reported, the Final Standards 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 voluntary Self-Assessment. In conjunction with the issuance of the Final Standards, the agencies published a 60-day notice requesting public comments on the information collection process and parameters, and how this requirement might affect the regulated entities. 

In a new Notice published in the Federal Register on November 6, 2015, the agencies collectively reported receiving four comment letters during the comment-period, all of which addressed the collection of information under the Self-Assessment. Specifically, the letters raised concerns regarding the practical utility of the collection of information, the lack of a standardized collection instrument, assurances of confidentiality, and the accuracy of agencies’ burden estimate.

The most important discussion centered around confidentiality of information submitted to the agencies. Several concerns were raised about Freedom of Information Act and issues of agency disclosure of confidential information contained in the 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.”

In the end, the agencies opted not to change anything in the Final Standards in response to concerns about the burdensome nature of compliance or the confidentiality concerns. The agencies also are seeking additional written comments on the information collection process and burden. Those interested may submit their comments to the CFPB, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, or the Securities Exchange Commission by December 7, 2015. Given that the Final Standards have been in effect since June 10, 2015, entities should begin to take steps to incorporate the Final Standards into their daily business practices and plan for their Self-Assessment.

Ballard Spahr's Diversity Team advises clients on the design and implementation of diversity and inclusion programs and is already counseling several CFPB-supervised entities on developing and implementing diversity programs. The team includes members of Ballard Spahr’s Consumer Financial Services, Mortgage Banking, Labor and Employment, and Securities groups, which regularly advise financial institutions on compliance with consumer financial services laws related to diversity and inclusion.

For more information please contact Brian D. Pedrow, Dee Spagnuolo, or the attorney with whom you regularly work.


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