After an internal survey of CFPB staff evaluations showed that white and nonunion workers had higher average ratings than their nonwhite and nonunionzed co-workers, the bureau scrapped its current system and instead awarded most employees with the highest ratings available.
The resulting boosts in pay and benefits will cost CFPB at least $5 million, according to a report in the American Banker.
Director Richard Cordray was deeply embarrassed by the results of the investigation. The bureau was established in 2010 as a watchdog organization in part to: "Enforce laws that outlaw discrimination and other unfair treatment in consumer finance." Paying its own minority staffers less would be hard to explain when it tried to prosecute others for similar offenses.
In an email to CFPB employees, Cordray wrote: "We have determined that there were broad-based disparities in the way performance ratings were assigned across our employee base in both 2012 and 2013. These differences indicate a systemic disadvantage to various categories of employees that persisted across divisions, offices, and other employee characteristics."
Employees received an annual evaluation with a rating on a scale of one to five. The ratings determined what pay and benefit increases the employees got. The internal review found that white employees received an average rating of 3.94, while Asians received 3.81, Hispanics 3.69 and blacks 3.63. Similarly, the average rating for a nonunion employee was 4.04, while unionized ones got 3.79. The differences were "statistically significant," the report found.
Other disparities included that workers older than 40 got an average rating of 3.78 while those younger than 40 got 3.94. Those who worked at the CFPB's Washington office had an average of 3.95 while those who worked elsewhere for the bureau had an average of 3.63.
On the other hand, female employees had a marginally higher average rating than men, 3.89 compared to 3.83.
To address the issue, CFPB will now treat all employees who received a "3" or "4" rated in 2012 or 2013 as if they received a "5" in terms of their salaries and benefits.
As Cordray explained to CFPB staffers, they must hold themselves "accountable to the same standards of fairness that we expect of our regulated entities."