CFPB: Industry Should 'Start Now' To Comply with Workplace Diversity and Inclusion Standards

by Ballard Spahr LLP
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I recently participated in a panel presentation at the MBA Strategic Markets and Diversity Summit in Washington, D.C. Stuart Ishimaru, Director of the Consumer Financial Protection Bureau's Office of Minority and Women Inclusion, also sat on the panel.

I recently participated in a panel presentation at the MBA Strategic Markets and Diversity Summit, in Washington, D.C. Stuart Ishimaru, Director of the Consumer Financial Protection Bureau's Office of Minority and Women Inclusion, also sat on the panel.

The presentation focused on Section 342 of the Dodd-Frank Act and the proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices (the Proposed Standards). The Proposed Standards were issued by six agencies mandated to assess the diversity and inclusion policies and practices of regulated entities in the financial services industry. We are awaiting issuance of the final standards.

Some of the most common questions being asked about the Proposed Standards are:

When are entities expected to comply?

I asked Mr. Ishimaru if he could let us know when the final standards are expected to be issued and whether regulated entities will have lead-in time to take necessary compliance measures. While Mr. Ishimaru could not say with certainty when this would occur, he recommended that entities "start now" to take compliance steps. We understand that final standards are expected before the end of this year.

To whom do the standards apply?

Section 342 applies to "entities regulated by [an] agency." This means that all entities regulated by the CFPB or by any one of the following eight agencies are covered: Department of the Treasury, Federal Deposit Insurance Corporation (FDIC), Federal Housing Finance Agency (FHFA), all Federal Reserve Banks, Board of Governors of the Federal Reserve System, National Credit Union Administration (NCUA), Office of the Comptroller of Currency (OCC), and Securities and Exchange Commission (SEC). In addition to the CFPB, the agencies that issued the Proposed Standards are OCC, Federal Reserve Board, FDIC, NCUA, and SEC.

The Proposed Standards recognize that some regulated entities also are required to file EEO-1 reports with the Equal Employment Opportunity Commission (EEOC) and/or are federal contractors covered by affirmative action laws. These requirements are triggered by the size of the employer and whether the employer has a federal contract or subcontract above the dollar threshold. However, the proposed standards are broader and not limited in their application to only entities covered by these legal requirements.

What compliance steps are required?

The Proposed Standards contain specific standards across four key areas: organizational commitment to diversity and inclusion; workforce profile and employment practices; procurement and business practices – supplier diversity; and practices to promote transparency of organizational diversity and inclusion.

Recognizing that one size does not fit all, the Proposed Standards note that an entity may tailor its approach to compliance, taking into consideration the entity's size, total assets, number of employees, governance structure, revenues, number of members and/or customers, contract volume, geographic location, and community characteristics.

Given Mr. Ishimaru's recommendation to begin moving toward compliance now, I suggest regulated entities start by assessing what diversity and inclusion measures already are in place and can be continued or expanded in the future. In addition, certain of the Proposed Standards are highly likely to be part of the final standards, including the development of a strategic plan, diversity policies, metrics and progress reporting, and outreach. These areas would be good starting points for an entity's diversity and inclusion program.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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