The Dodd–Frank Act established the Bureau of Consumer Financial Protection (CFPB) to regulate certain financial institutions and related entities subject to various consumer financial-protection laws. The CFPB takes the position that its broad oversight and enforcement authority includes the authority to require supervised institutions to disclose privileged information. In July 2012, the CFPB issued a rule purportedly anointing selective waiver protection for privileged information that it compelled from supervised institutions. And in December 2012, Congress expanded the banking selective waiver statute to include the CFPB.
But questions remain. Does the CFPB have authority to compel privileged information? Do the federal selective waiver provisions provide total protection? Will these issues promote or reduce supervised institutions desire to engage in frank and candid legal discussions? Will these issues ever receive a court resolution?
POP examines these issues in a three-part blog post. Part I addresses whether the CFPB actually has authority to compel privileged information. Part II addresses the import of 2012 federal selective waiver regulations and statutes. And Part III discusses a recently filed case, Pisinski v. CFPB, which may place these issues center stage for resolution.
The Dodd–Frank Act provides the CFPB with “exclusive authority to require reports and conduct examinations on a periodic basis” of its supervised institutions. 12 U.S.C. § 5515(b). In CFPB Bulletin 12–01, accessible here, CFPB General Counsel Leonard Kennedy explained that, once the CFPB issues a request for information, supervised entities “are required to provide all documents and other information responsive to the request.” In short, the CFPB must have “full and unfettered access to information” and the failure to provide all information is a legal violation for which the CFPB “will pursue all available remedies.”
The CFPB’s position is that “full and unfettered access” includes access to an institution’s privileged information, and the CFPB “continues to adhere to the position that it can compel privileged information pursuant to its supervisory authority.” See 77 Fed. Reg. 39617, 39619 (accessible here). The basis for this claim is that, because the CFPB may compel privileged information, an institution’s provision of privileged information is not voluntary and therefore not a privilege waiver. For legal authority, the CFPB cites a 1991 OCC Interpretive Letter, 1991 WL 338409 (Dec. 3, 1991), and three federal-court decisions. Boston Auction Co. v. Western Farm Credit, 925 F. Supp. 1478 (D. Haw. 1996); Vanguard Sav. & Loan Ass’n v. Banks, 1995 WL 555871 (E.D. Pa. Sept. 18, 1995); U.S. v. Buco, 1991 WL 82459 (D. Mass. May 13, 1991).
But supervised institutions have a strong argument that the CFPB does not have authority to compel privileged information. Neither the Dodd–Frank Act nor any other federal statute provides the CFPB with authority to require production of privileged information. And the common-law authority upon which the CFPB relies for its non-waiver position is, at best, questionable.
None of the three cases involved an entity challenging a banking agency’s authority to compel privileged information. Each case, rather, discussed selective waiver issues, and only one is a published decision. The Vanguard case discussed waiver of the work-product doctrine rather than the attorney–client privilege—a critical distinction. In Buco, the magistrate judge discussed selective waiver and then simply declined to find waiver “without some guidance from the First Circuit or a district court within the Circuit.” The Boston Auction case involved the court predicting Hawaii state law on privilege waiver, and did not discuss federal common-law waiver issues.
The American Bar Association strongly disagrees that the CFPB has authority to require a supervised entity to produce privileged information. See ABA Letter to CFPB, accessible here. And the authority for the CFPB’s position is highly suspect. No resolution will occur, however, until a supervised institution refuses to produce privileged information in response to a CFPB request, the CFPB seeks to enforce its request, and a court directly addresses the matter.