H.R. 4014, a new bill passed by the House of Representatives that will protect the confidentiality and privilege of documents and information shared with the CFPB, is being blocked in the Senate, principally by Senator Bob Corker of Tennessee. Banks have been hesitant to disclose information to the CFPB as they fear attorneys and other third parties could use the documents disclosed against them in litigation. The bipartisan bill would assure banks that documents shared with the CFPB would remain confidential and is intended to assuage banks’ fears about sharing sensitive documents with the CFPB.
The bill provides that the submission of any documents or information to the Bureau for any purpose in the course of any supervisory or regulatory process will not be construed as waiving, destroying, or otherwise affecting any privilege that the submitting entity may claim with respect to the submitted information under Federal or State law as to any person or entity other than the Bureau. The bill, as currently proposed, also stipulates that the CFPB “shall not be deemed to have waived any privilege applicable to any information by transferring that information to or permitting that information to be used by (A) any other covered agency, in any capacity; or (B) any other agency of the Federal Government.” The purpose of H.R. 4014 is to clarify that institutions regulated by the Bureau have not risked and will not waive applicable legal privileges as to third parties when they have shared or will provide information to the CFPB. The bill also makes clear that the CFPB can share such information with other Federal agencies without impacting a regulated institution’s attorney-client privilege or work-product immunity as it applies to third parties. This statutory change will ensure that privileged information remains privileged. Specifically, H.R. 4014 amends Section 11(t)(2)(A) of the Federal Deposit Insurance Act (the Act) by adding the CFPB to the list of covered agencies that may share information with other covered or Federal agencies without waiving any privilege applicable to the information.
Ironically, Corker supports the idea behind the legislation. However, Corker and another senator opposing the bill want amendments to the Dodd-Frank Act before they approve H.R. 4014. While Corker is not the only lawmaker blocking the proposed legislation, he is seen as the primary barrier to its passage. Others believe the larger piece of legislation regarding changes to the Dodd-Frank Act will take a while to work through, as there is not a consensus as to what changes should be made, and they want to rush this protective legislation through as quickly as possible.
Despite Corker’s block of the bipartisan measure, his actions have not garnered total criticism. Paul Merski, executive vice president and chief economist at the Independent Community Bankers of America noted, “I don’t have any concerns with a senator using his Senate powers to bring attention to his other concerns. That’s part of the Senate process. It’s a very deliberate body.”
As the current bill remains on hold, new proposals to the bill have now made their way to the House Financial Services Committee. This new proposal would extend the protections given to financial institutions that share information with the CFPB, and contains protective coverage for confidential information that the Bureau shares with state regulators. Thus far, financial industry groups like the American Financial Services Association and the National Association of Mortgage Brokers support the broader protections included in the new proposal.