A simmering battle over LGBTQ issues is reaching a boiling point at the Consumer Financial Protection Bureau, the government agency partly established by Sen. Elizabeth Warren and tasked with safeguarding taxpayers. The situation comes nearly three months after The Advocate published an exclusive report in collaboration with Allied Progress detailing that the head of the Bureau’s Office of Innovation, Paul Watkins, attempted to hide the fact that he worked as senior legal counsel for Alliance Defending Freedom, a hate group seeking to criminalize LGBTQ people.
PRIDE, an LGBTQ employee resource group at the CFPB, has been hosting discussions about the matter since the article came out in June. As many as 70 employees have joined across all departments, and even more have called in.
One employee walked out of a meeting with CFPB Director Kathy Kraninger in protest, according to a source at the bureau. According to a grievance obtained by The Advocate, Watkins and the subsequent response from senior leadership about him has created a hostile work environment.
Employees have begun an officewide petition challenging the bureau to further investigate Watkins's past and whether it's impacting the decisions he's making now. Middle managers have started to discuss the issue with staff hoping to mollify LGBTQ employees in the absence of any action from senior leadership, according to employees. Most of those employees are concerned not only for their own welfare, but also that of Americans most impacted by CFPB’s new policy changes.
Watkins was hired to lead the Office of Innovation in July 2018 by then Acting CFPB director Mick Mulvaney, an anti-LGBTQ former congressman from South Carolina who now serves as President Trump's Acting Chief of Staff. As head of the Office of Innovation, Watkins is one of the people behind three new policies (released on September 10 by the CFPB) that reduce regulatory requirements for new financial technologies.
At least one of these policies — the Compliance Assistance Sandbox Policy — gives Watkins the explicit authority to exempt businesses from liability for products and services that fall under certain consumer protection laws like the Equal Credit Opportunity Act, which prohibits lending discrimination. These new policies allow the bureau to exempt industries from laws that protect LGBTQ consumers while also giving individual businesses limitless exemptions from fair lending laws, safe harbor from federal and state enforcement, and immunity from private lawsuits.
Another merky component is how the financial technology industry (often referred to as "fintech"), which Watkins regulates, might be employing racially-biased algorithms that reflect human prejudice in lending. A recent analysis of millions of accounts by Fannie Mae and Freddie Mac between 2008 and 2015 compared mortgages that were issued by both traditional one-on-one lenders to those issued by fintech lenders. In both instances, results showed that Black and Latinx people were charged six to nine points higher interest rates than comparable white or Asian people.
Soon after The Advocate story on Watkins's past work with a hate group was published, he was grilled by Rep. Katie Porter during a June congressional hearing on fintech regulation. The California congresswoman questioned how LGBTQ consumers could trust Watkins will protect them from discrimination; he didn't disavow any personal bigotry, but said he would abide by the Constitution.
Porter, along with Warren and Congresswoman Ayanna Pressley of Massachusetts, also sent a letter to CFPB head Kraninger, urging her to reconsider the continued employment of Watkins.
In August, as Politico reports, the director in turn wrote a letter to Warren defending Watkins, saying he is “eminently qualified for the position he holds” and that “The Bureau workforce represents many backgrounds, identities, and perspectives.”
After the congressional hearing, the bureau’s PRIDE group sent a memberwide memo about the issue before meeting privately with Kirsten Sutton, chief of staff at the CFPB. On the same day, representatives from various Employee Resource Groups (ASPIRE, Asian and Pacific Islander employees; RISE, Black employees; ADELANTE, Latinx employees; and PARENTS, parent employees; and PRIDE) met with Kraninger.
The Advocate has obtained follow up emails to these meetings.
According to the follow up conversations with Sutton, PRIDE claims that after taking their concerns to the chief of staff, she responded by citing that “the Bureau shouldn’t have to approach allegations from a ‘guilty until proven innocent’ standpoint."
“Working at an organization does not necessarily mean that one personally shares every position taken by that organization," explained Sutton, later trying to equate employees' dissent over Watkins' past with current Bureau concerns. "I’m confident there are Bureau employees that personally disagreed with decisions made by Acting Director Mulvaney, or Director Cordray and yet those employees might still work at the Bureau.”
“I believe we can promote a more inclusive culture at the Bureau by fostering an environment of professionalism and respect for personal differences,” Sutton concluded. “This respect includes not making assumptions on individuals’ beliefs based solely on their status as a political appointee.”
Meanwhile, Kraninger defended her stance on Watkins.
“I disagree that Senior Leadership has been silent,” Kraninger wrote in an August 16 email to employee resource group [ERG] leaders. “Not only have I been engaging with the ERGs since my arrival, including participating in [a group discussion] on July 11th with the leadership of all the ERGs, I have had numerous meetings with senior Bureau leaders to ensure that the Bureau is a respectful and inclusive workplace for all employees.
“Since my confirmation as director, I have repeatedly expressed my commitment to upholding all applicable laws and policies, including the Bureau’s own EEO and Non-Discrimination policy which states the Bureau does not and will not tolerate discrimination or harassment against any employee or applicant.
“I hold everyone in the Bureau accountable for adhering to the Policy in their actions in the workplace. At the same time, I want to emphasize that it is how people behave in the workplace that matters. All employees at the Bureau have a right to their own personal views and they do not owe anyone an acknowledgement of what their views are or a justification for holding them, whatever they might be.”
One LGBTQ employee is not satisfied with that response. The employee (who The Advocate is choosing not to identify publicly) filed a grievance through the National Treasury Employees union, alleging the bureau violated its collective bargaining agreement, which guarantees a safe environment free from discrimination.
The worker contends they were given a request in March from the Office of Innovation to start the “PDF application forms for the No-Action Letter and Product Sandbox programs.” This particular employee was in charge of building the PDF that would later contain the CFPB’s new policies, as put forth by Watkins. In their emails with the Office of Innovation, as described in the grievance, “Paul Watkins wanted the PDF forms done in early June and was certain that the policy would be approved by [Kraninger] and that there would not be further revisions needed once [Kraninger's] approval process began.”
However, upon reading The Advocate article in June, the employee learned about the “potential discriminatory impact” of the policies, then met with their manager and stated they were “uncomfortable” with being asked to personally contribute.
The grievance also notes that Watkins worked for Alliance Defending Freedom’s Blackstone Legal Fellowship, a leadership training program for law students, with the purpose of training “lawyers to work government positions to further discrimination based on religious beliefs under the guise of religious freedom.”
“Both Paul Watkins’ beliefs and his refusal so far to denounce the beliefs and policies advocated by his previous employer, ADF, are in violation of the CBA’s Employee Rights and Equal Opportunity Employment articles and create a discriminatory, exclusionary, disrespectful and harmful work environment,” the grievance concluded.
The overall response of LGBTQ employees, according to a source at the bureau, is dismay. Even after the exit of Richard Cordray, who served as director from 2012 to 2017, senior leadership had shown support for queer communities, despite a threatening political climate outside.
The situation around Watkins, however, has thrown their faith into question as, they say, senior leadership has refused to engage with valid concerns employees have raised. Meanwhile, Watkins isn't going anywhere.