Dodd Frank Update: CFPB Treatment Of Privileged Information

In response to industry concerns about the treatment of confidential information to be provided to the US Bureau of Consumer Financial Protection (the "CFPB"), the CFPB issued CFPB Bulletin 12-01 (January 4, 2012) regarding The Bureau's Supervision Authority and Treatment of Confidential Supervisory Information ("Bulletin 12-01") to provide guidance regarding its collection of information through the supervisory process and the confidentiality protections that the process provides to CFPB-supervised institutions.

WITHHOLDING INFORMATION TO PROTECT THE ATTORNEY-CLIENT PRIVILEGE

In Bulletin 12-01, the CFPB also warned "supervised institutions" against selectively withholding documents from the CFPB as a means to protect the attorney client-privilege. The CFPB asserted that providing privileged information to the CFPB would not waive the privilege, and warned that failure to provide such documents as a means to protect the privilege would lead to an enforcement action:

Certain supervised institutions have expressed concern that providing privileged information, such as documents protected by the attorney-client privilege, to Bureau examiners could waive the institution's privilege with respect to third parties... [T]he provision of information to the Bureau pursuant to a supervisory request would not waive any privilege that may attach to such information.1

In support of its position, the CFPB cites a Federal district court in Hawaii2 and a 1991 OCC interpretive letter for the proposition that an involuntary disclosure of privileged information pursuant to examination authority does not waive the attorney-client privilege. In addition, the CFPB cites 12 U.S.C. 55813 arguing that Congress intended the CFPB's authority to be the same as the other prudential supervisors such as the Board of Governors of the Federal Reserve System (the "Federal Reserve"), the Federal Deposit Insurance Corporation (the "FDIC") and the Office of the Comptroller of the Currency (the "OCC"). The CFPB essentially asserts that it has the same authority that the Federal Reserve, the FDIC and the OCC have under the Federal Deposit Insurance Act, 12 U.S.C. 1828(x), which provides that:

The submission by any person of any information to 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 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 agency, supervisor, or authority." Id. (Emphasis added).

While the CFPB's attempts to provide a self-declared regulatory safe harbor are helpful to CFPB-supervised institutions and may reduce the risk of losing the attorney-client privilege, those attempts are not a substitute for amending the Federal Deposit Insurance Act to expressly include the CFPB as a Federal banking agency, which would provide certainty.

CONCERNS RAISED BY BULLETIN 12-01

The CFPB's Position Does Not Appear to Be Grounded in Statutory Language

An initial concern with the CFPB's position is that the CFPB's position does not appear to be grounded in statutory language because the Federal Deposit Insurance Act (the "FDIA") does not include the CFPB in the definition of appropriate Federal banking agency. For example, 12 U.S.C. 1813(q) defines "appropriate Federal banking agency'' to expressly include the OCC, the Federal Reserve, the FDIC, and the Director of the Office of Thrift Supervision, but does not include the CFPB. Similarly, there is also at least an issue regarding whether the CFPB will disclose privileged information pursuant to a Freedom of Information Act4 request. This issue arises in the context of information provided to the CFPB outside of the examination context. While Federal banking agencies such as the Federal Reserve, the FDIC and the OCC have long standing regulations that limit access to confidential information, including in the face of a subpoena, it is not clear that the CFPB will follow the same practices of those banking agencies.

The CFPB's Position Does Not Appear to Be Grounded in Banking Case Law

A second concern is that the CFPB's position does not appear to be grounded in banking cases. There is a body of banking case law supporting the refusal of the OCC and other Federal banking agencies to permit a bank to disclose examination information, including when a court requires the disclosure. By way of illustration, in a 1997 interpretive letter,5 the OCC prohibited First National Bank of Florida from disclosing examination reports in camera asserting that to do so would violate Federal law,6 and be inconsistent with Federal appellate courts.7 The OCC reached the same conclusion in a 2003 interpretive letter8 when it asserted that examination reports are afforded a bank examination privilege that frees them from disclosure to third parties without the consent of the OCC. In the same case, the OCC argued that third parties must exhaust their administrative remedies with the OCC before they may seek relief in court for the...