[author: John L. Culhane, Jr.]

In his remarks last week to the Congressional Black Caucus Foundation, CFPB Director Richard Cordray spoke about the role of the Office of Minority and Women Inclusion (OMWI) that various federal agencies are required to establish pursuant to Section 342 of the Dodd-Frank Act. Those agencies include the Fed, Treasury, CFPB, OCC, FDIC, NCUA, SEC and FHFA.

One of the tasks Section 342 assigned to each OMWI is the development of standards to assess the diversity policies and practices of the institutions its agency regulates. Should an OMWI find violations of any “statutes, regulations or executive orders pertaining to civil rights,” Section 342 directs it to coordinate with the agency’s administrator “regarding the design and implementation of any remedies resulting from [such violations].”

According to Director Cordray, “the financial services industry did not traditionally reflect all its potential customers” but is “ripe for change.” He observed that to the extent the CFPB can “encourage and influence a broadening of equal opportunity” at financial institutions through its diversity standards, the CFPB will “quite possibly make breakthroughs for the principles of diversity and inclusion that will be profound and lasting.”  Director Cordray indicated that it is important for the CFPB “to step forward right now and make a persuasive case for diversity and inclusion.”

Given the CFPB’s view that there has been insufficient diversity in the financial services industry and the CFPB’s intention to significantly impact diversity policies through it standards, many institutions could find that their diversity policies fall short of the CFPB’s standards (which standards are likely to be similar to the standards adopted by the OMWIs of other agencies.) We have previously speculated that since Section 342 is silent as to the actions an OMWI can take if it finds an institution’s diversity policies to be unsatisfactory, an OMWI might take the position that it can recommend that its agency or the CFPB conduct a more rigorous fair lending examination.