Recently Introduced Bills to Protect Privileged Documents: Are They Sufficient to Protect Credit Unions and Nonbanks?

By: Stephanie C. Robinson

Several bills floating around Congress this month aim to address the privilege waiver issue that is causing anxiety for CFPB-regulated entities. Banks and credit unions routinely have shared privileged documents with their prudential regulators (banking agencies and the National Credit Union Administration) without concern about a claim of waiver because of two statutory provisions that say submitting privileged information to these regulators in the course of supervision does not result in a waiver as to any other person or entity.

Now that the CFPB has begun supervising large banks and credit unions, these institutions would like to see a similar statutory protection for disclosures to the CFPB. (Arguably, the statutory fix is not actually necessary, given that CFPB issued guidance setting forth its position that providing privileged information does not effect a privilege waiver; however, it would resolve any perceived ambiguity surrounding the issue of privilege.) The pending bills would expressly extend the privilege protection to documents submitted to the CFPB.

A few bills (S. 2055, S. 2099, and related bill H.R. 4014) would amend the section of the Federal Deposit Insurance Act (FDIA) that protects privileged information provided to the other banking regulators in the course of supervision. While the “fix” is located in a statutory section that applies to federally insured depository institutions (see “Regulations governing insured depository institutions”), the language explicitly provides that the right to the privilege protection extends to “any person” and should be construed to apply to non-depository institutions.

At one point, Rep. Shelley Capito (R-WV) had proposed language that would amend both the FDIA and the Federal Credit Union Act (FCUA) (H.R. 3461). But most of the bills introduced more recently do not propose to amend the FCUA. This may be because the sponsors of these bills forgot about the few (only three?) federal credit unions for which the CFPB is the primary regulator.

H.R. 3871, introduced by Rep. Bill Huizenga (R. Mich.) on February 1, 2012, would amend the Consumer Financial Protection Act to provide that the submission by any person of any information to the CFPB in the course of any supervisory or regulatory process of the CFPB shall not be construed as waiving any applicable privileges, thereby synchronizing in one place the CFPB’s rights to seek information from supervised entities with such supervised entities’ rights not to waive evidentiary privileges, without regard to the type of institution.

The House Financial Services Committee approved H.R. 4014 on Thursday, February 16, and reported it out of committee on a voice vote. Given that this bill is moving on two parallel tracks, this may be the version that ultimately passes.

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