Last week, a second legislative effort was launched to attempt to fix the much-discussed issue regarding the CFPB’s demands for attorney-client privileged information from banks subject to its supervision. The new bill, H.R. 3871, seeks to “preserve privilege for information submitted to” the Bureau, but the key text of the legislation may or may not fully address the problem.
Rather than attempting to amend 12 U.S.C. § 1828(x) (the anti-waiver provision applicable to the federal banking agencies), H.R. 3871 would amend § 1022 of Dodd-Frank to add the following language:
The submission by any person of any information to the Bureau for any purpose in the course of any supervisory or regulatory process of the Bureau 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 the Bureau.
The language seems to solve the immediate problem of a potential argument of waiver arising from a supervised entity’s compliance with the CFPB’s demand for privileged documents, but it is a potentially incomplete solution. This is because it fails to address what happens to the privilege if the CFPB shares the privileged documents with another federal agency or with a state governmental agency, as it has reserved the right to do.
H.R. 3871 does not address this issue explicitly, which is problematic in light of the specific provision dealing with sharing of privileged information by the federal banking agencies. That provision, 12 U.S.C. § 1821(t), preserves the privilege as to information shared with any other federal agency. (See my partner Keith Fisher’s discussion of this issue here). There is no analogous provision in H.R. 3871. This could be argued to support a waiver of the privilege if the CFPB shares information given to it by a supervised bank.
On the other hand, it could be argued that the language of the bill, coupled with its purpose, supports the idea that the non-waiver of the privilege extends to all third parties, regardless of what the CFPB does with the information.
When it comes to such an important subject, there should be a clear and explicit legislative solution, not one that leaves parties guessing as to the ultimate fate of the attorney-client privilege. H.R. 3871 should be amended to either provide that sharing by the CFPB does not impact the privilege, or better yet, should forbid the CFPB from sharing privileged information outside its supervision personnel. Either solution would provide the needed certainty to regulated entities, and would make the CFPB’s supervision efforts more effective.