The Consumer Financial Protection Bureau (“Bureau”) issued CFPB Bulletin 12-01 on January 4, 2012 providing guidance regarding the Bureau’s collection of information through the supervision process, and the confidentiality protection that this process provides to supervised institutions.
1. Waiver of Privilege. If your institution provides privileged information to the Bureau, such as documents protected by the attorney-client privilege, will this amount to waiver of the privilege? If the institution subsequently finds itself in a civil lawsuit, will the institution be held to have waived the privilege?
Section 607 of the Financial Services Regulating Relief Act of 2006 (“FSRRA”) provides a statutory privilege for materials provided to federal banking regulators: the submission of information to “any Federal banking agency … in the course of any supervisory or regulatory process” “shall not be construed as waiving … any privilege.” The Bureau unfortunately is not included in the list of covered federal banking agencies. The Bureau believes that because of the transfer of “all [consumer financial law] powers and duties” of these named regulators to the Bureau under the Dodd-Frank Act 12 U.S.C. § 5581, the Bureau will receive the same treatment as the prudential regulators when it comes to privilege. When the Dodd-Frank Act was enacted, the Bureau was not added to the list of Federal banking agencies under FSRRA. Thus, despite Bulletin 12-01, institutions delivering privileged material to the Bureau are at risk.
The Bureau advises an institution may not withhold documents or information from the Bureau on grounds of attorney-client privilege.
The Bureau notes that institutions should memorialize privilege claims when conveying privileged documents or information to the Bureau.
The Bureau will upon request provide a written demand and also confirmation that the materials will be treated confidentiality in accordance with Bulletin 12-01.
It remains to be seen whether courts in civil matters where an institution finds itself a defendant will concur with the Bureau’s view that production to the Bureau does not waive a privilege.
2. Bureau Sharing of Privileged Documents Information with Other Regulators and Enforcement Authorities. Will the Bureau share your privileged and other documents with your prudential regulator? A state attorney general? The Federal Bureau of Investigation? The Internal Revenue Service?
(a) Other Institution/Bank Supervisors. The Bureau will share privileged and other information with prudential regulators and state regulators that share supervisory jurisdiction over an institution supervised by the Bureau.
Under 12 U.S.C. § 5512(c)(6)(c)(i) the Bureau is required to share examination reports with a prudential regulator, state regulator, or other Federal agency with jurisdiction over the institution that is the subject of the report, “upon receiving reasonable assurances of confidentiality.” Presumably, attorney-client privileged documents referred to or encompassed within the examination report will be produced.
(b) Non Supervisors.
- Criminal/Law Violations. The Bureau is required to provide to the Attorney General evidence of a potential violation of Federal criminal law. 12 U.S.C. § 5566. Presumably attorney-client privileged documents will be produced.
- Taxes. The Bureau is required to provide to the commissioner of Internal Revenue certain information related to possible tax law noncompliance. 12 U.S.C. § 5515(b)(5). Presumably attorney-client privileged documents will be produced.
- Other Agencies Not Engaged in Supervision.
(i) Required by Law. The Bureau will share information “where required by law.” This phrase is not further defined in CFPB Bulletin 12-10.
(ii) Law Enforcement Agencies Where Sharing is Not Required by Law.
- “Confidential supervisory information” will be shared with law enforcement agencies, including state attorneys general, “only in very limited circumstances and upon review of all the relevant facts and considerations.”
- The significance of the law enforcement interest at stake is an important consideration.
- Even where significance is present, the Bureau may choose not to share based on other considerations, including:
- The integrity of the supervisory process.
- The importance of preserving the confidentiality of the information.
- The General Counsel of the Bureau will decide the issue.
- The Bureau is free to do as it pleases in administrative or judicial proceedings, “subject to appropriate protective orders.”
- Any confidential supervisory information (including documents protected by privilege) provided to another federal or state agency remains the property of the Bureau, may not be disclosed without the Bureau’s permission, and “retains any applicable privilege.” Citing 12 C.F.R. § 1070.47 (emphasis added).
Recommendations - The Larger Lesson Here: Attorneys and their bank clients have come to assume that their communications are protected from disclosure by the attorney-client privilege and in some cases the work-product doctrine, protections essential to ensuring a free flow of information and the constitutional guarantee of the right to counsel. Banks and their counsel need to accept that the privilege is not available when it comes to their banking regulators, at least if the banking regulators have their way. Banks and their counsel need to assume that client-attorney memoranda and correspondence and emails to and from the client discussing legal risks associated with products and practices may be requested by banking regulators and may have to be produced. In light of this risk, institutions should consider taking these steps:
- Review your practices with counsel.
- Appropriately label all documents covered by attorney-client or work product privileges.
- Obtain the Bureau’s written recognition of the non-waiver of privilege for documents delivered that are subject to a privilege.
- Ask for written notice before privileged documents are released by the Bureau to a third party.
- Consider obtaining judicial recognition of non-waiver before delivery of extremely sensitive information.
- Consider other privileges (regulatory submissions in general) and label all documents accordingly, and advise the Bureau in writing of the claim prior to delivery (blanket claim or production by production claim).
- Assume the worst: the Bureau will share your privileged documents. Assume that communications with counsel may not be protected.
- Ask counsel to create all documents and emails with the potential absence/loss of privilege in mind, and understanding that the privilege will in all likelihood not be available relative to the Bureau.