The CFPB has ramped up its enforcement staff to approximately 100 attorneys. That’s more than twice as many as are currently employed by the OCC, which is no shrinking violet when it comes to enforcement and compliance. The disparity is striking. It is all the more striking since, unlike the OCC, the CFPB has no 150-year track record of supervision and regulation upon which to judge its reasonably anticipated enforcement needs. The disparity also tells us that not only can we expect considerable enforcement activity from the Bureau, but that enforcement will a principal — if not the principal — focus of the agency’s activity.
That is consistent with the CFPB’s likely desire — now that it has at least an interim Director — to live up to its billing as a “consumer watchdog.” When one factors in the Bureau’s avowed intention to work closely with State Attorneys General, then the politics of that close cooperation would tend to align the incentives at the CFPB towards accumulating scalps. If these deductions are correct, then it would not be surprising if the primary targets turn out not to be nondepository covered persons under Title X of the Dodd-Frank Act but the many banks, thrifts, and credit unions with over $10 billion in assets that are subject to CFPB jurisdiction.
By contrast, the bank regulators tend to resolve the vast majority of problems — unsafe and unsound banking practices and violations of law or regulations — informally, principally through the examination process and, if some supervisory action is necessary, through low level documents such as MOUs. Supervisory situations that escalate to a level at which enforcement attorneys need to become involved are thus a distinct minority, but it appears that the CFPB will follow a vastly different approach.
All of this makes somewhat more ominous the Bureau’s issuance earlier this month of Bulletin 12-01. Invoking the spirit, but ignoring the letter, of the law, the CFPB seeks to persuade regulated entities that the anti-privilege waiver provision, 12 U.S.C. § 1828(x), which by its terms does not at this time cover the Bureau, should nevertheless be construed to encompass the CFPB, and that they should be comfortable in voluntarily turning over privileged documents upon request. Far more compelling legal arguments advanced by the banking agencies were rejected by courts during the 1990’s in allowing plaintiffs’ class action attorneys access through discovery to confidential examination reports and other privileged information.
The CFPB could, of course, ask a sister regulatory agency to turn over privileged documents in its possession relating to a particular regulated entity. Doing so would not waive that entity’s privilege because of 12 U.S.C. § 1821(t), which is much broader in scope than § 1828(x), and the CFPB seems to qualify under § 1821(t) as “any other agency of the Federal Government (as defined in section 6 of Title 18).” What happens, however, if the Bureau decides to turn the documents over to someone else (like a State A.G.’s office)? A waiver of privilege would then certainly have taken place. Bank regulators will seek to avoid this by entering into an understanding with the CFPB that it will not turn over to any third party documents received from a federal bank regulatory agency without the latter’s consent, but that is far from the kind of protection the holder of the privilege would want.