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The American Bar Association argued a CFPB rule to protect privileged bank information is flawed because it presumes the agency has a right to the information in the first place.
April 16 -
The Consumer Financial Protection Bureau has vowed to protect privileged information collected during the supervision process, but banks are nervous that might not be enough.
February 3
WASHINGTON — Although banks are still seeking a bill that would protect privileged information they give the Consumer Financial Protection Bureau, the agency finalized its own rule Thursday meant to assure institutions of confidentiality.
The rule, which is unchanged from a March proposal, states that a financial institution's transfer of privileged information to the CFPB does not damage the confidential nature of that material. It also protects the confidentiality of that information if the bureau shares it with another federal or state agency.
"We are committed to safeguarding the confidential information of the institutions we supervise to ensure the bureau is best equipped to do its job and protect consumers," CFPB Director Richard Cordray said in a press release. "This new rule supports the free flow of information that is essential to an effective supervision program."
Yet the industry may not be satisfied with just a regulation by the new agency.
The bureau has said the Dodd-Frank Act gives the CFPB enough authority to ensure confidential treatment of banks' information obtained through the supervisory process. Yet banks and attorneys worry that authority has limits. Typically, information given to a third party loses attorney-client privilege, and prior legislation formally exempted the other bank regulators from that rule. But Dodd-Frank did not expressly include the CFPB in that exemption.
The CFPB has lent support to pending legislation that would afford it the same formal exemption as other agencies. Yet it reiterated in the final rule that its own authority is sufficient.
"Although the bureau has expressed support for legislation codifying the bureau's view that the submission of privileged information to the bureau does not result in a waiver" of attorney-client privilege "the bureau does not believe such legislation is necessary," the rule said.
The legislation has strong bipartisan support, but has been held up by Sen. Bob Corker, R-Tenn., among other senators, who is hoping for passage of a larger bill that would make several technical changes to Dodd-Frank.
