WASHINGTON — Republicans and Democrats have finally found something they can agree on where the Consumer Financial Protection Bureau is concerned.
Members on both sides of the aisle said Wednesday they would support a bill to ensure that certain information shared with the bureau during the exam process is still protected by attorney-client privilege. The endorsements followed several statements by CFPB Director Richard Cordray, who said he would support adding the bureau to the list of regulators to whom banks may provide information without waiving that privilege.
"It is our intent to move this legislation quickly, especially given Mr. Cordray's recent statements that Congress 'may want to look at a legislative fix,'" said Shelley Moore Capito, the chairman of the House Financial Services Subcommittee on Financial Institutions and Consumer Credit. "We hope our colleagues across the aisle will work with us on moving this without delay."
The subcommittee's Democrats said they had no objection to the measure, introduced by Rep. Bill Huizenga, R-Mich., which would amend the Federal Deposit Insurance Act to expressly state that turning information over to the CFPB during the course of an exam would not constitute a waiver of attorney-client privilege. Such a waiver could open a bank up to subpoenas by third parties, who could use the information to mount a lawsuit against the bank, the industry has said.
"The simple fact is, there is a hole, in my opinion and the opinion of virtually everyone, that has to be fixed, so let's go do it," Huizenga said. "Let's go prove to the American people that we can set aside bickering and go get something done that is going to protect consumers and protect the people serving consumers."
The waiver exemption has long applied to the other prudential regulators, but after several conflicting court decisions, Congress added the protection in statute in 2006.
Adding the CFPB to the statute would provide additional certainty, the panel's witnesses said.
"While the bureau has expressed its willingness to address this issue through regulation, the [American Bankers Association] believes it appropriate to add certainty by enacting the same express rules regarding privilege of information for the bureau as those already established for the other federal banking supervisors," said Michael Hunter, the ABA's chief operating officer.
The ABA suggested amending the proposed bill (HR 3871) slightly to clarify that any privileged information the bureau shares with other federal agencies does not constitute a waiver. That provision also applies to other prudential regulators under the Federal Deposit Insurance Act, but is not included in Huizenga's bill.
Andrew J. Pincus, a partner with Mayer Brown LLP who testified on behalf of the U.S. Chamber of Commerce, said that the CFPB addressed the privilege issue "as best it can" in a Jan. 4 bulletin. While bank lawyers will be comforted by the opinion, he said, it still doesn't provide the certainty that a change in statute would.
"Providing that statutory certainty is going to be good not only for business, it's going to be good for making the exam process work effectively," Pincus said.
With most in agreement on the privilege question, the hearing focused primarily on two other bills that would place CFPB within the Treasury Department and replace its spot on the Federal Deposit Insurance Corp. with the Federal Reserve Board chairman.
The bills were new but the debate was the same: Republicans said the proposals would provide improved oversight and accountability at the bureau, while Democrats derided them as blatant attempts to undermine and cripple CFPB's ability to fulfill its mission.
Rep. Carolyn Maloney, the top Democrat on the subcommittee, said efforts to place the bureau within the Treasury — and thus subject it to the appropriations process — and replace it on the FDIC board are "seriously misguided."
"Subjecting a regulatory agency and the CFPB in particular to appropriations in this Republican-led chamber is to put it on the chopping block," she said.
Arthur Wilmarth, a professor at the George Washington University School of Law, testified that removing the CFPB director from the FDIC board would eliminate important interaction between the CFPB and the other prudential regulators.
"I thought that's what CFPB's opponents wanted," Wilmarth said. "I thought they wanted interaction between the safety and soundness function and the consumer protection function."