We blogged recently about H.R. 4014, which President Obama signed into law near the end of 2012. The law identifies the CFPB as a regulator to whom a regulated entity may submit privileged information without waiving any state or federal law privilege and provides that the CFPB may share privileged information of a regulated entity with other federal agencies without waiver of any state or federal law privilege.
The protections afforded by H.R. 4014 have several important limitations, which we have explored in a recent legal alert. Not only does H.R. 4014 provide no explicit protection for privileged information provided to state attorneys general, it does not address the fundamental threshold issue of whether the CFPB has the right to compel production of privileged documents in examinations. This issue is particularly critical in light of the role that enforcement lawyers are playing in CFPB exams and the likelihood (if not certainty) that any privileged information provided to exam staff will be shared with enforcement attorneys when the CFPB believes there may be legal violations.
Calvin Hagins, of the CFPB’s Office of Supervision, and Kristen Donoghue, Assistant Litigation Deputy in the Bureau’s Office of Enforcement, addressed privilege issues at the ABA Consumer Financial Services Committee meeting in Naples, Florida. Mr. Hagins explained that, during his time at the Office of the Comptroller of the Currency, he reviewed “everything” in connection with bank examinations, ostensibly including privileged materials. However, the issue of whether a bank agency (or the CFPB) can override the attorney-client privilege has not been previously litigated. In our view, the statutory basis for the authority to require production of privileged documents on the part of prudential regulators such as the OCC is unclear, at best. The Bureau’s authority, in our view, is even weaker, because the prudential regulators have frequently justified their asserted access to privileged documents by their need to evaluate the “safety and soundness” of a bank’s operations. The CFPB has no responsibility for safety and soundness.
Later at the same meeting, a round table discussed the impact of potential CFPB sharing of privileged information with state authorities. During that discussion Gerald Sachs, Senior Counsel, Enforcement Strategy for the CFPB, advised that the CFPB was aware of the potential privilege issue and that guidance might be forthcoming.
One thing is certain, though: the issue of whether the CFPB has authority to compel the production of privileged documents in an examination is far from settled, and we expect that challenges to the CFPB’s ability to do so will be forthcoming.