Congress is acting quickly to ensure the confidentiality of documents that financial institutions provide to the CFPB in the course of examinations and investigations. Legislation remedying an unintended omission in the Dodd-Frank Act will protect confidential information provided to the Bureau by both depository and non-depository institutions.
The House Financial Services Committee on February 16, 2012 passed H.R. 4014. The bill, introduced by U.S. Representative Bill Huizenga (R-MI), amends the Federal Deposit Insurance Act, 12 U.S.C. 1811, to specifically state that materials that financial institutions provide to the Bureau remain privileged under both the attorney-client and work product privileges. Federal law already provides such protection for information that financial institutions provide to other federal banking agencies. The Dodd-Frank Act, which created the Bureau, contained no such provision.
Financial industry members were concerned that, absent this protection, third parties would argue that an institution waived privilege in responding to Bureau inquiries, thus making privileged documents discoverable in lawsuits against an institution. Current law provides that a bank does not waive confidentiality and risk disclosure to a third party, potentially involved in litigation with the bank, by providing information to its banking regulator. Once this legislation is passed, those entities supervised by the Bureau will have the same protection when releasing information to the new agency.
The legislation has bi-partisan support and is considered non-controversial, so much so that it passed the House Financial Services Committee unanimously on a voice vote. Senate Banking Committee Chairman Tim Johnson (D-SD) and Committee Ranking Minority Member Richard Shelby (R-AL) have introduced a companion bill in the United States Senate, S. 2099. Bureau Director Richard Corday has said that the Obama Administration would support legislation to ensure the confidentiality of documents provided to his agency.
The text of H.R. 4014 is available at http://financialservices.house.gov/UploadedFiles/BILLS-112-HR4014ih.pdf.