A bill (H.R. 5062) recently passed by the House of Representatives would amend the Consumer Financial Protection Act (the CFPA), which is Title X of the Dodd-Frank legislation, to provide protection against waiver of state and federal law privileges for nondepository institutions supervised by the CFPB.

Entitled the “Examination and Supervisory Privilege Parity Act of 2014,” the bill received strong support from the American Financial Services Association (AFSA). The bill provides anti-waiver protection for “the sharing of information” with federal banking regulators, state banking regulators, or state regulators that “license, supervise, or examine the offering of consumer financial products or services.” Specifically, H.R. 5062 would amend Dodd-Frank § 1024(b)(3) as follows:

To minimize regulatory burden, the Bureau shall coordinate its supervisory activities with the supervisory activities conducted by prudential
regulators, the State bank regulatory authorities, and the State agencies that license, supervise, or examine the offering of consumer financial
products or services, including establishing their respective schedules for examining persons described in subsection (a)(1) and requirements
regarding reports to be submitted by such persons. The sharing of information with such regulators, authorities, and agencies shall not be
construed as waiving, destroying, or otherwise affecting any privilege or confidentiality such person may claim with respect to such information
under Federal or State law as to any person or entity other than such Bureau, agency, supervisory, or authority.

As drafted, the bill is not a model of clarity. For example, the added second sentence does not explicate whether it refers to the sharing of information by the Bureau or by the nonbank. Aids to construction of this language point in different directions. On the one hand, the entirety of Section 1024 is about the authority of the CFPB, and the amended § 1024(b)(3) begins with “the Bureau” as the subject of the sentence, all of which suggests that the privilege preservation relates to sharing by the Bureau. On the other hand, the introductory language at the head of H.R. 5062 announces the intention to amend the CFPA “to specify that privilege and confidentiality are maintained when information is shared by certain nondepository covered persons with Federal and State financial regulators . . . .” (Emphasis added). That suggests that it is the nonbank that must do the sharing. A third interpretation (a third hand, if you will) was uttered on the floor of the House by Rep. Shelley Caputo (R.-WV) when she said, “This bill clarifies that the sharing of information between Federal banking regulators and State agencies that license, supervise, or examine the offering of consumer financial products or services will not be construed as waiving, destroying, or otherwise affecting any privilege or confidentiality right that a person could claim.” (Emphasis added). That suggests that any kind of sharing between or among the Bureau and other Federal or State agencies, regardless of which agency initiates the sharing, would still preserve the privilege.

According to the statement submitted by AFSA in support of H.R. 5062, the bill is intended to protect a nonbank that is examined by the CFPB but does not fall under a state banking regulator’s jurisdiction from a privilege waiver if the CFPB shares privileged information with the nonbank’s state regulator.

However one interprets that second sentence, it is clear that the bill is believed necessary because these protections were not included in the legislation Congress passed in December 2012 that amended the Federal Deposit Insurance Act to provide protection against privilege waivers when privileged information is shared between or among the CFPB and federal and state bank regulators. While the majority of states give their bank supervisors authority to license various nonbank lenders, a significant number give that authority to a different state agency that would not be covered by the FDI Act provision.