Schadenfreude noun, often capitalized: a feeling of enjoyment that comes from seeing or hearing about the troubles of other people.

Auto dealers everywhere, and possibly the banking industry in general, had to choke down some strong feelings of schadenfreude a couple weeks ago.  The CFPB, after months of emphasizing its proxy methodology for determining discrimination (part of the discussions here, here and here previously), got a taste of its own medicine, so to speak.  Recall that the CFPB has been using the concept of disparate impact in suits against auto lenders in order to force changes in how auto dealers are paid participation.  Disparate impact means that, regardless of the reason, the appearance of discrimination is the result.

So what happened?  The best summary is from American Banker (which broke the news):

CFPB managers show a pattern of ranking white employees distinctly better than minorities in performance reviews used to grant raises and issue bonuses. Overall, whites were twice as likely in 2013 to receive the agency’s top grade than were African-American or Hispanic employees, the data shows.

Oh boy.  American Banker did yoeman’s work reviewing CFPB personnel evaluations and obtaining confidential information about internal issues plaguing the CFPB.  But not even blinking in the face of adversity, the CFPB responded:

“If the ongoing review finds problems, we will be proactive about taking appropriate corrective actions,” said the spokesman, Sam Gilford. “We hold ourselves to the standards of fairness that we expect of the companies and industries we regulate.”

Does this mean the end of the CFPB’s concentration on changing participation practices?  Hardly.  Peeling the onion a bit, the disparate impact claim is simply the multi-tool du jour.  If the CFPB wants to enforce change in consumer finance practices, it is a quick (and often present) way to end the argument.  Ultimately, disparate impact by proxy is not a methodology likely to survive close scrutiny, so we should expect new fronts to emerge in this war.