Protecting Confidentiality of Internal Reviews by Financial Services Providers


Consumer financial services companies are facing rapidly growing risk management and litigation issues involving compliance with laws and regulations prohibiting protected class discrimination, unfair and deceptive trade practices, invasion of privacy through sale or provision of customer data to third parties, and other consumer issues. Addressing customer and employee complaints, compliance program development and monitoring, and litigation in these areas requires that inside and outside counsel have the necessary facts to properly advise their clients. The gathering of those facts, and the provision of legal advice, is best done within the protections of the attorney-client privilege and work-product doctrine.

A first protective step is to have such efforts directed and reviewed by the company's greater counsel, or by outside counsel. Moreover, to the extent it is reasonable, work that is in anticipation of litigation should be so designated to bolster the claim of attorney work-product doctrine protection. With respect to self-testing or "mystery shopping," work-product protection may be a useful compliance tool. If a decision is made to undertake such an effort, it is important to have attorney supervision of such self-testing to maximize the ability to preserve the privilege with respect to the tests and their results. In particular, inside or outside counsel should be involved in the decision to undertake such an effort, and the selection of the vendor to perform the testing. Test results should be reported to counsel in writing, and marked as privileged. Distribution of the results should be limited.

One potential additional protection for internal investigative efforts is the self-evaluation privilege. The basic rationale for the privilege is the "overwhelming public interest," in encouraging certain critical internal evaluations and discussions which might be deterred were confidentiality not assured. The privilege is not uniformally recognized and its reach has been circumscribed even where recognized, as noted in Federal Trade Commission v. TRW, Inc., 628 F.2d 207 (1980): "Whatever may be the status of the 'self-evaluative' privilege in the context of private litigation, courts with apparent uniformity have refused its application where,... the documents in question have been sought by a governmental agency."

This article appeared in the Review of Banking and Financial Services, Volume 15, No. 12, and is reprinted with permission.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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