The AFSA proposal has engendered two different reactions in the industry. On one hand, proponents of the proposal see it as a step in the right direction, because it would provide greater protection to privileged documents when they are shared by the CFPB with a state banking regulatory agency. Since the Bureau has announced that it may engage in such sharing, and it seems likely that this sharing will occur with respect to state-chartered banks and non-banks supervised by the CFPB, the AFSA proposal makes good sense and should not be politically controversial. Indeed, we would hope that the CFPB will support the proposal, as it has stated it supports HR 4014.
On the other hand, some in the industry see the AFSA proposal as counterproductive. HR 4014 was expected to move swiftly through Congress on a bipartisan basis, and “tweaking” the language might delay a legislative solution to a pressing problem, or deter Congress from acting at all.
Regardless of what happens with HR 4014 and the AFSA proposal, doubts will remain with respect to the privilege issue. Even under the AFSA proposal, two important issues remain unresolved: (1) the Bureau’s authority to demand privileged documents from supervised entities, as highlighted by the American Bar Association’s comment letter on the Bureau’s proposed privilege regulation, and (2) the status of privileged documents shared by the CFPB with a state attorney general, with respect to which the AFSA proposal is silent. We doubt that either of these issues will be resolved by Congress any time soon, but until they are, entities supervised by the CFPB will continue to be unsure of the ultimate fate of privileged documents they share with the CFPB, and therefore may be justifiably reluctant to do so.