Yesterday, the Senate passed H.R. 4014, an important bill that clarifies that privileged materials produced to the Consumer Financial Protection Bureau (CFPB) retain their privileged character as to third parties. Because the House passed the same bill in March, the measure will now go to President Obama, who is expected to sign it.
The bill amends 12 U.S.C. § 1828(x) to place the Bureau on equal footing with the banking agencies—a so-called “legislative fix” that many observers have called for to address concerns that the Dodd-Frank Act did not provide clear guidance with respect to the status of privileged material provided to the CFPB. The amended statutory provision would read:
The submission by any person of any information to the Bureau of Consumer Financial Protection, any Federal banking agency, State bank supervisor, or foreign banking authority for any purpose in the course of any supervisory or regulatory process of such Bureau, agency, supervisor, or authority shall not be construed as waiving, destroying, or otherwise affecting any privilege such person may claim with respect to such information under Federal or State law as to any person or entity other than such Bureau, agency, supervisor, or authority.
The language “any person” makes clear that the bill applies to submissions by banks, non-banks, and individuals. The bill also amends 12 U.S.C. § 1821(t)(2)(A) to allow the Bureau to share information with other federal agencies without waiving “any privilege applicable” to that information.
Once it receives the President’s signature, the bill will partly resolve some long-standing debates over the effect of producing privileged information to the CFPB. In a January 2012 bulletin, the Bureau first argued that the production of privileged information to the agency would not waive any applicable privileges. Many supervised entities were skeptical, given the absence of any non-waiver statute or regulation applicable to the CFPB. Just a few months later, the agency finalized a regulation that also purported to preserve such privileges. But again, several groups remained concerned that the CFPB’s assurances were not enough to avoid waiver.
H.R. 4014 now offers some measure of comfort to CFPB-supervised entities, but a number of questions remain. For instance:
Although the amendment to Section 1821(t) explains how privileges are affected when the CFPB shares information with federal agencies, it does not say how privileges will be affected if the CFPB shares such information with state and local authorities—as it has said it intends to do and it has agreed to do in various compacts with state regulatory agencies and enforcement officials.
The bill does not speak at all to the question of whether, as the CFPB has maintained, it is entitled to obtain privileged material in the first place. The bill only provides that the transmitter may still assert privilege as to third parties if such material is transmitted to the CFPB. The CFPB to date has aggressively sought privileged and attorney work product material relating to institutions’ fair lending compliance efforts. Where institutions turn that material over, the bill would provide no protection against the CFPB’s use of the material to prosecute the institution.
It is not clear whether the newly-amended Section 1828(x) will apply retroactively to protect confidential information that has already been submitted to the CFPB.
BuckleySandler will continue to monitor these issues. In the meantime, questions regarding the matters discussed in this alert may be directed to any of our lawyers listed below, or to any other BuckleySandler attorney with whom you have consulted in the past.