The American Bankers Association (“ABA”) recently submitted its comments on the CFPB’s interim final rule regarding the treatment of confidential information obtained by the CFPB.
Among other things, the ABA recommended the CFPB’s proposed information sharing rule be amended to:
• Ensure supervisory information remains confidential and is not disclosed to third parties except in very limited circumstances so as to promote ongoing dialogue and transparency between the CFPB and its supervised institutions;
• Take into account established limitations on the investigative powers of state Attorneys General and other state law enforcement officials so as to limit the disclosure of confidential supervisory information to such state officials to only those circumstances in which those officials exercise authority to enforce applicable law within a judicial process;
• Limit any regular sharing of confidential information (as defined under Section 1070.2 of Dodd Frank and including but not limited to confidential supervisory information) to federal and state agencies that have financial institution supervisory authority over CFPB supervised institutions; and
• State that the CFPB will not normally share confidential information (as defined under Section 1070.2) with third parties. In particular, the ABA noted that this is the standard used by the Board of Governors of the Federal Reserve System and OCC.
Notably, the ABA steadfastly advocated against any broad or presumptive disclosure of confidential supervisory information to state Attorneys General or in support of actions against financial institutions that are unrelated to Dodd Frank or other federal consumer financial laws under which states have enforcement authority. In particular, the ABA expressed concern that regularly sharing confidential supervisory information with state Attorneys General could actually impair the CFPB’s mission as a result of premature law enforcement actions by states that disrupt the CFPB’s examination process and other supervisory activities.
Moreover, the ABA emphasized that the CFPB must consider the language of Section 1047 of Dodd-Frank and the Supreme Court’s decision in Cuomo v. Clearing House Association, in which the Court expressly rejected the authority of state Attorneys General to obtain information directly from national banks outside of a judicial process. Therefore, in the ABA’s view, in codifying Cuomo, Congress could not have intended for state Attorneys General to be able to obtain confidential information pertaining to national banks through the CFPB that they could not have obtained elsewhere.
The ABA also lobbied for advance notice to financial institutions prior to any disclosure of confidential supervisory information to various third parties in order to allow the financial institutions to take steps to avoid any safety and soundness concerns.
The ABA also proposed broadening the list of third parties to whom financial institutions can disclose confidential supervisory information under the current rule to clarify that the scope of the term “consultant” includes any third party service provider that is acting on behalf of a financial institution. As currently drafted, the rule permits disclosure only to certified public accountants, legal counsel, and undefined “consultants.”
The CFPB can either establish itself as having an open and fair dialogue with the institutions it supervises or it can position itself as an agency that is designed to gather information for litigation. The stance the CFPB takes with regard to the ABA’s comments will illustrate which of these paths it intends to pursue. However, it would seem that the CFPB will be better positioned to fulfill its goals and become an effective regulator if it chooses the path of providing for an open dialogue with its supervised institutions, as proposed by the ABA.