CFPB Confidentiality Bill Runs into a One-Man Roadblock

Despite strong bipartisan support, a bill that would provide banks greater assurance of confidentiality when they provide information to the Consumer Financial Protection Bureau remains mired in the Senate.

Exactly why is hard to unravel, but most industry representatives point to Sen. Bob Corker as the chief roadblock. The Tennessee Republican acknowledged in an interview this week that he is blocking the bill's enactment even though he supports the idea behind the legislation.

"We understand that's a problem in giving up confidential information, and we'd like to see a fix," Corker said Tuesday.

According to Senate rules, a single senator can hold up legislation through a maneuver known as a hold, which required 60 votes and precious time on the Senate calendar to overcome.

Corker argued his delay wasn't technically a "hold" but instead a desire to attach the bill to a larger package of technical fixes to the Dodd-Frank Act.

"I think it'd be too strong to say we have a hold on that right now," Corker said. "We would like to see some other things — again that are technical in nature and have bipartisan support — fixed also."

Both Corker and industry representatives said the Tennessee Republican is not the only lawmaker to hold up the measure, but he is believed to be the key obstacle.

Still, several industry observers worry that Corker's gambit has the potential to derail what they see as a small but meaningful correction in federal law.

In addition to having near-unanimous support on Capitol Hill, the House-passed bill also has the endorsement of the CFPB.

The bill would address banks' concern that under current law, if they share information that is subject to the attorney-client privilege with the CFPB, that action could later be construed by a court as a waiver of the privilege, which could result in the bank having to turn the information over to other parties in litigation.

The problem with Corker's attempt to pass the measure as part of a package of fixes to Dodd-Frank, industry representatives say, is that there is no consensus in Congress about what constitutes a technical fix to the 2010 reform law.

Corker did suggest in Tuesday's interview that he has not dug in his heels too deeply regarding the House-passed bill.

"We understand we may get to a point where there's no other avenue but to let this go through," he said.

In the meantime, a separate, broader legislative proposal has been circulating in the House Financial Services Committee.

This second legislative proposal, a copy of which was obtained by American Banker, would broaden the protections provided to financial institutions when they share privileged information with the CFPB.

The second bill would offer protection to financial institutions with regard to information they provide to the CFPB and the bureau in turn shares with a state regulator.

The proposal would appear to benefit non-bank lenders, such as mortgage brokers, which have reason to expect that the CFPB will be sharing examination information with their state regulators.

In a recent letter to the leaders of the House Financial Services Committee and the Senate Banking Committee, the American Financial Services Association, the National Association of Mortgage Brokers and other groups that represent non-bank lenders expressed support for broadening the language in the bill already passed by the House.

"Our goal is to provide parity among examined companies of all types," the groups wrote, "and we do not seek to advantage any type of creditor."

Within banking industry circles, reaction was split on whether the broader legislative language being circulated in the House is a positive development.

Christopher Willis, a lawyer at Ballard Spahr, said that the new legislative language would address a problem with the House-passed bill - that it leaves unresolved the status of documents that the CFPB shares with the states.

"I've referred to the legislation that's come through the House as a partial fix," he said.

But others cautioned that broadening the legislation is a risky move that could jeopardize the support of the CFPB and Democrats in Congress.

One former Hill staffer was critical of Corker in the context of the changes being contemplated in the House, saying: "I think it does show that the delay is going to have untold consequences, which is unfortunate for the core bill, which needs to be streamlined in order to get through the Senate."

Other bank industry officials expressed greater patience with the Tennessee Republican.

"Sometimes a meal takes a little bit longer to cook than you anticipate," said James Ballentine, executive vice president of congressional relations at the American Bankers Association, adding that he would like to get the bill passed before the end of the year. "Time is certainly slipping through our fingers quickly."

Paul Merski, executive vice president and chief economist at the Independent Community Bankers of America, also declined to criticize Corker.

"I don't have any concerns with a senator using his Senate powers to bring attention to his other concerns. That's part of the Senate process," Merski said. "It's a very deliberative body."

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