The Consumer Financial Protection Bureau (CFPB) published a proposed rule today, clarifying that legally privileged information will retain its privilege even if submitted to the Bureau. The rule also provides that the CFPB’s provision of privileged information to another Federal or State agency will not waive any applicable privilege.
The proposed rule states that “[o]nce effective, the rule is intended to govern all claims by third parties in Federal or State court that any person has waived any applicable privilege by providing information to the Bureau, even if the submission of such information to the Bureau occurred prior to the date the rule became effective. Furthermore…the Bureau is prepared to take all reasonable and appropriate steps to assist supervised entities in rebutting any claims made in Federal or State court, both before and after the rule’s effective date, that supervised entities have waived any privilege by providing privileged information to the Bureau.”
The confidentiality issue had posed a potential roadblock to the CFPB’s supervision of bank and nonbank firms since the CFPB may seek to review confidential legal memos, including internal or outside counsel assessments of consumer protection practices, to evaluate corporate compliance. Banks had pushed back against sharing otherwise privileged documents on the concern that production of those documents might later lead to discovery by third parties, which could create a litigation risk.
The new rule seeks to allay these concerns and sidestep a potential conflict as the Supervision program gets underway. The rule is open for public comment for 30 days.