Ballard Spahr LLP
John L. Culhane, Jr
Section 342, a provision of the Dodd-Frank Act we have previously written about but that hasn’t otherwise gotten much attention, could ultimately have a significant impact on the banking, credit union and securities industries. The provision required the establishment of an Office of Minority and Women Inclusion (OMWI) by various federal agencies. Those agencies include the Fed, Treasury, CFPB, OCC, FDIC, NCUA, SEC and FHFA. Each of those agencies has appointed an OMWI director except, somewhat ironically, the CFPB.
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].”
Another assigned task is the submission to Congress of an annual report regarding the actions taken by the OMWIs and their agencies. Although the OMWI directors had previously proposed to hold roundtable meetings with industry participants before they submit their report to Congress at the end of this month, we have learned that those roundtables will not happen before late spring.
We understand that the OMWI directors plan to hold three such roundtables to gather information to assist them in developing the standards required by Section 342. It appears that the roundtables may be divided by industry, with one roundtable devoted to retail banking, one to credit unions and one to securities. We expect that, by the time the roundtables begin, the CFPB’s OMWI director will have been appointed and he or she will have an influential role in the decisions made by all of the OMWIs.
An important issue under consideration by the OMWI directors will undoubtedly be the role of the examination process in assessing an institution’s diversity policies and practices and addressing any deficiencies. Section 342 is silent as what actions an OMWI can take if it finds an institution’s diversity policies and practices to be unsatisfactory. Nonetheless, we fully expect each OMWI to take the position that it has discretion to take whatever action it deems appropriate, including recommending that its agency or the CFPB conduct a more rigorous fair lending examination.