ABA President Laurel G. Bellows urged Senate leaders last month to promptly enact S. 3394, a bill that would create a single, consistent standard for the treatment of privileged information submitted to all federal agencies that supervise banks, including the new Consumer Financial Protection Bureau (CFPB).
Current law, 12 USC §1828(x), provides that privileged materials shared with federal banking agencies remain privileged as to all other parties, but the definition of “federal banking agency” in the Federal Deposit Insurance Act does not explicitly include the CFPB.
Although the CFPB, established by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, recently issued guidance and a new rule asserting that §1828(x) applies to its receipt of privileged materials, the ABA has raised serious questions regarding the CFPB’s authority to protect the privileged status of such materials without a statutory fix.
“By explicitly applying the same privilege standards to information submitted to the CFPB that currently apply to any submissions to a ‘federal banking agency,’ S. 3394 would help ensure a more integrated, consistent and coordinated approach to the regulation of financial services providers,” Bellows wrote Sept. 20 to Sen. Tim Johnson (D-S.D.), chairman of the Senate Committee on Banking, Housing and Urban Affairs, and the committee’s ranking member, Sen. Richard Shelby (R-Ala.).
She pointed out that S. 3394 also takes the important step of adding the CFPB to the list of “covered agencies” under 12 USC §1821(t) that may share privileged information with other agencies without causing a waiver of the privilege. This would place the CFPB on the same footing with regard to privilege as the other federal bank regulators when it shares privileged information with any other federal government agency, she said.
The proposed change, Bellows said, makes particular sense in light of the existing statutory requirement that the CFPB and prudential regulators share draft reports of examination with each other.
Urging prompt enactment of S. 3394, Bellows said the ABA’s support for including the CFPB in the coverage of 12 USC §1828(x) and 12 USC §1821(t) “reflects the critical role that those two statutes play in limiting the potential adverse consequences of the review of privileged materials by federal banking agencies.”
In addition to protecting the privilege, both S. 3394 and H.R. 4014, similar legislation passed by the House in March, also advance key financial regulatory reform principles adopted by the ABA in 2009 that were developed by the association’s Task Force on Financial Markets Regulatory Reform.