[Federal Register Volume 77, Number 51 (Thursday, March 15, 2012)]
[Proposed Rules]
[Pages 15286-15291]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-6254]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 77, No. 51 / Thursday, March 15, 2012 /
Proposed Rules
[[Page 15286]]
BUREAU OF CONSUMER FINANCIAL PROTECTION
12 CFR Part 1070
[Docket No. CFPB-2012-0010]
RIN 3170-AA20
Confidential Treatment of Privileged Information
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Proposed rule; request for public comment.
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SUMMARY: The Bureau of Consumer Financial Protection (Bureau or CFPB)
is publishing for notice and comment proposed amendments to 12 CFR part
1070, subpart D, its rules relating to the confidential treatment of
information obtained from persons in connection with its exercise of
authorities under Federal consumer financial law. The proposed
amendments will add a new section to these rules providing that the
submission by any person of any information to the Bureau in the course
of the Bureau's supervisory or regulatory processes will not waive or
otherwise affect any privilege such person may claim with respect to
such information under Federal or State law as to any other person or
entity. In addition, the Bureau is proposing to readopt 12 CFR
1070.47(c) in modified form to provide that the Bureau's provision of
privileged information to another Federal or State agency does not
waive any applicable privilege, whether the privilege belongs to the
Bureau or any other person.
DATES: Written comments must be received on or before April 16, 2012.
ADDRESSES: Interested parties are invited to submit written comments
electronically or in paper form. Because paper mail in the Washington,
DC area and at the Bureau is subject to delay, commenters are
encouraged to submit comments electronically. You may submit comments
by any of the following methods:
Electronic: http://www.regulations.gov. Follow the
instructions for submitting comments.
Mail: Monica Jackson, Office of the Executive Secretary,
Consumer Financial Protection Bureau, 1700 G Street NW., Washington, DC
20552.
Hand Delivery/Courier: Monica Jackson, Office of the
Executive Secretary, Consumer Financial Protection Bureau, 1700 G
Street NW., Washington, DC 20552.
Instructions: All submissions must include the agency name and
docket number or Regulatory Information Number (RIN) for this
rulemaking. In general, all comments received will be posted without
change to http://www.regulations.gov. In addition, comments will be
available for public inspection and copying at 1700 G Street NW.,
Washington, DC 20552 on official business days between the hours of 10
a.m. and 5 p.m. Eastern Time. You can make an appointment to inspect
the documents by telephoning (202) 435-7275.
All comments, including attachments and other supporting materials,
will become part of the public record and subject to public disclosure.
Submit only information that you wish to make available publicly. Do
not include sensitive personal information, such as account numbers or
Social Security numbers. Comments will not be edited to remove any
identifying or contact information, such as name and address
information, email addresses, or telephone numbers.
FOR FURTHER INFORMATION CONTACT: John R. Coleman, Senior Litigation
Counsel at (202) 435-7254, Office of General Counsel, Consumer
Financial Protection Bureau.
SUPPLEMENTARY INFORMATION:
I. Background
Title X of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act) established the Bureau as an
independent agency within the Federal Reserve System responsible for
regulating the offering and provision of consumer financial products
and services under the Federal consumer financial laws.\1\ On July 21,
2011, the Bureau assumed the authority to supervise insured depository
institutions and credit unions with total assets of more than
$10,000,000,000, as well as their affiliates and service providers, for
compliance with Federal consumer financial law and other related
purposes.\2\ This supervisory authority transferred to the Bureau from
the prudential regulators, and all ``powers and duties'' of the
prudential regulators ``relating'' to this transferred authority were
granted to the Bureau.\3\ Congress also provided the Bureau with nearly
identical authority to supervise certain nondepository institutions.\4\
The entities subject to the Bureau's supervisory authority are referred
to herein as ``supervised entities.''
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\1\ See Public Law 111-203, section 1011(a) (2010).
\2\ See Dodd-Frank Act Sec. 1025(b)(1), (d), 12 U.S.C.
5515(b)(1), (d); see also Dodd-Frank Act Sec. 1029A, 12 U.S.C. 5511
note (stating that this provision becomes effective on the
designated transfer date, established by the Secretary of the
Treasury as July 21, 2011). The Bureau also has certain supervisory
authorities with respect to other depository institutions and credit
unions, as well as the service providers to a substantial number of
such institutions. See Dodd-Frank Act Sec. 1026(b), (c), (e), 12
U.S.C. 5516(b), (c), (e).
\3\ See Dodd-Frank Act Sec. 1061, 12 U.S.C. 5581. The
prudential regulators are the Office of the Comptroller of the
Currency (OCC), the Board of Governors of the Federal Reserve System
(Board), the Federal Deposit Insurance Corporation (FDIC), the
National Credit Union Administration (NCUA), and the former Office
of Thrift Supervision (OTS). See Dodd-Frank Act Sec. 1002(24), 12
U.S.C. 5481(24).
\4\ See Dodd-Frank Act Sec. 1024(b), 12 U.S.C. 5514(b). The
Bureau also has supervisory authority over service providers to such
institutions. See Dodd-Frank Act Sec. 1024(e), 12 U.S.C. 5514(e).
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In exercising its supervisory authority, the Bureau will at times
request from its supervised entities information that may be subject to
one or more statutory or common law privileges, including, for example,
the attorney-client privilege and attorney work product protection. The
prudential regulators have taken the position that a supervised
institution's submission of privileged information to its regulator
does not waive any applicable privilege with respect to any third
person, a position Congress codified in 2006 through amendments to the
National Credit Union Act and the Federal Deposit Insurance Act.\5\
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\5\ See Financial Services Regulatory Relief Act of 2006
(FSRRA), Public Law 109-351, Sec. 607 (2006), codified at 12 U.S.C.
1785(j), 1828(x).
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The Dodd-Frank Act does not explicitly address whether the
submission of privileged information to the Bureau in the course of the
Bureau's supervisory or regulatory processes will affect any privilege
a supervised entity may claim with respect to such
[[Page 15287]]
information. Congress, however, did provide that all the powers and
duties of the prudential regulators relating to their transferred
consumer financial protection functions would be granted to the Bureau,
and this grant of authority encompasses the ability to receive
privileged information from supervised entities without effecting a
waiver. Moreover, Congress delegated authority to the Bureau to
``prescribe rules regarding the confidential treatment of information
obtained from persons in connection with the exercise of its
authorities under Federal consumer financial law.'' \6\ Pursuant to
this and other rulemaking authority, including the authority to
prescribe rules it determines are ``necessary or appropriate to enable
the Bureau to administer and carry out the purposes and objectives of
the Federal consumer financial laws, and to prevent evasions thereof,''
\7\ the Bureau proposes to promulgate a rule providing that a person's
submission of information to the Bureau in the course of its
supervisory or regulatory processes does not thereby waive any
privilege the person may claim with respect to such information as to
any person other than the Bureau.
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\6\ See Dodd-Frank Act Sec. 1022(c)(6)(A), 12 U.S.C.
5512(c)(6)(A). ``Federal consumer financial law'' includes Title X
of the Dodd-Frank Act and all rules promulgated thereunder. See
Dodd-Frank Act Sec. 1002(14), 12 U.S.C. 5481(14).
\7\ See Dodd-Frank Act Sec. 1022(b)(1), 12 U.S.C. 5512(b)(1).
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On July 28, 2011, the Bureau issued a rule providing that ``[t]he
provision by the CFPB of any confidential information pursuant to [12
CFR part 1070, subpart D] does not constitute a waiver, or otherwise
affect, any privilege any agency or person may claim with respect to
such information under federal law.'' 12 CFR 1070.47(c). The Bureau
proposes to readopt this rule in modified form to clarify that it is
intended to be a rule with the force and effect of law and to provide
the public with an additional opportunity to comment upon the rule and
the Bureau's rationale for issuing the rule. The Bureau is in the
process of reviewing comments received on the interim final rule that
is codified at 12 CFR part 1070, and intends to issue a final rule in
response to those comments.
II. Summary of Proposed Rule
A. Addition of 12 CFR 1070.48
The Bureau proposes to add the following new section to its rules
governing the confidential treatment of information:
Sec. 1070.48 Privileges not affected by disclosure to the CFPB.
(a) In General. The submission by any person of any information to
the CFPB for any purpose in the course of any supervisory or regulatory
process of the CFPB shall not be construed as waiving, destroying, or
otherwise affecting any privilege such person may claim with respect to
such information under Federal or State law as to any person or entity
other than the CFPB.
(b) Rule of Construction. Paragraph (a) shall not be construed as
implying or establishing that--
(1) Any person waives any privilege applicable to information that
is submitted or transferred under circumstances to which paragraph (a)
does not apply; or
(2) Any person would waive any privilege applicable to any
information by submitting the information to the Bureau but for this
section.
This rule is substantively identical to the statutory provisions
that apply to the submission of privileged information to the
prudential regulators, State bank and credit union supervisors, and
foreign banking authorities in the course of their supervisory or
regulatory processes.\8\ Once effective, the proposed rule is intended
to govern all claims, in Federal and State court, that an entity has
waived any applicable privilege by providing information requested by
the Bureau pursuant to its supervisory or regulatory authority.
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\8\ See 12 U.S.C. 1785(j), 1828(x).
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As noted, the Bureau has exclusive authority to supervise
depository institutions and credit unions with more than
$10,000,000,000 in assets, as well as their affiliates and service
providers, for purposes of assessing such institutions' compliance with
the requirements of Federal consumer financial law; obtaining
information about the activities subject to such laws and the
associated compliance systems or procedures of such entities; and
detecting and assessing associated risks to consumers and markets for
consumer financial products and services.\9\ The Bureau believes, based
on the historical experience of the prudential regulators and state
banking supervisors, and its experience to date, that effective
supervision may often require review of supervised entities' privileged
information. For example, part of a strong compliance program is self-
monitoring for consumer protection issues. Supervised entities often
employ inside or outside counsel to conduct analyses regarding whether
the entity is in compliance with Federal consumer financial law. The
Bureau may require access to these analyses, which may be subject to
the attorney-client privilege, to assess effectively the adequacy of
supervised entities' compliance with Federal consumer financial law as
well as these entities' systems and procedures for compliance with
Federal consumer financial law.
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\9\ See Dodd-Frank Act Sec. 1025(b)(1); 12 U.S.C. 5515(b)(1).
The Bureau will supervise nondepository supervised entities for the
same purposes. See Dodd-Frank Act Sec. 1024(b), 12 U.S.C. 5514(b).
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The experience of the prudential regulators prior to the enactment
of the Financial Services Regulatory Relief Act (FSRRA) also
demonstrates the need for the proposed rule. For example, the Office of
the Comptroller of the Currency (OCC) has consistently taken the
position that the submission of privileged information to its examiners
is not ``voluntary'' and therefore does not result in the waiver of any
applicable privilege with respect to third parties.\10\ Nonetheless,
the OCC supported enactment of the statutory ``selective waiver''
provision (codified at 12 U.S.C. 1828(x)) in order to provide greater
assurance to its supervised entities that their submission of
privileged information to the OCC would not thereby waive any
applicable privilege with respect to third parties.\11\ According to
the OCC, the provision would ``improve [its] ability to obtain
information from regulated entities'' and ``significantly enhance the
free flow of information between the OCC and the institutions [it]
supervise[s].'' \12\
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\10\ See OCC Interpretive Letter, 1991 WL 338409 (Dec. 3, 1991);
Statement of Julie L. Williams, First Senior Deputy Comptroller and
Chief Counsel, Office of the Comptroller of the Currency, before the
U.S. House Subcommittees on General Oversight and Investigations and
on Financial Institutions and Consumer Credit, Committee on
Financial Services, on Coordination and Information Sharing among
Financial Institution Regulators, 20 No. 2 OCC Q.J. 45, 2001 WL
1002162 (Mar. 6, 2001).
\11\ See Statement of Julie L. Williams, First Senior Deputy
Comptroller and Chief Counsel, Office of the Comptroller of the
Currency, before the Senate Committee on Banking, Housing and Urban
Affairs, Hearing: Consideration of Regulatory Relief Proposals, 2006
WLNR 3558037 (Mar. 1, 2006).
\12\ Id.; see also Testimony of Donald L. Kohn, Member of the
Board of Governors of the Federal Reserve System, before the Senate
Committee on Banking, Housing and Urban Affairs, Regulatory Relief--
Part 1, 2006 WLNR 3557970 (Mar. 2, 2006) (supporting passage of the
selective waiver provision because it would ``[f]acilitate the flow
of information during the supervisory process by clarifying that
depository institutions and others do not waive any privilege they
may have with respect to information when they provide the
information to a federal, state, or foreign banking authority as
part of the supervisory process.'').
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Similarly, although the Bureau believes that supervised entities do
not waive any applicable privilege with respect to third parties by
providing privileged information to the Bureau,
[[Page 15288]]
the Bureau proposes issuing 12 CFR 1070.48 to provide greater
assurances to supervised entities and thereby facilitate the Bureau's
supervisory and regulatory processes. Certain supervised entities have
expressed concern that providing privileged information to Bureau
supervisory personnel could waive the entities' privilege with respect
to third parties. This concern is based on judicial decisions holding
that entities have waived the attorney-client privilege or the work
product privilege with respect to third parties by providing
information outside of the supervisory context to other Federal
agencies, primarily the Department of Justice (DOJ) and the Securities
and Exchange Commission (SEC).\13\ In addition, the statutory selective
waiver provisions contained in the National Credit Union Act and the
Federal Deposit Insurance Act do not explicitly apply to information
submitted to the Bureau.\14\
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\13\ See, e.g., In re Qwest Commc'ns Int'l, Inc., 450 F.3d 1179
(10th Cir. 2006) (holding that providing information to DOJ and the
SEC in the course of their investigation waived the protections of
the attorney-client privilege and work product doctrine applicable
to that information); In re Columbia Healthcare Corp. Billing
Practices Litig., 293 F.3d 289 (6th Cir. 2002) (holding that
providing information to the DOJ pursuant to its investigation of
Columbia's billing practices waived any claim that the information
was subject to the attorney-client privilege or work product
doctrine); Westinghouse Elec. Corp. v. Phillipines, 951 F.2d 1414
(3d Cir. 1991) (holding that the disclosure of documents to the SEC
and the DOJ in order to cooperate with their investigations waived
the attorney-client privilege and the work product doctrine with
respect to those documents); but see Diversified Indus., Inc. v.
Meredith, 572 F.2d 596 (8th Cir. 1978) (en banc) (holding that
providing information to the SEC in the course of its investigation
did not result in a waiver of attorney-client privilege with respect
to third parties).
\14\ See 12 U.S.C. 1785(j), 1828(x); see also 12 U.S.C. 1813(z)
(defining Federal banking agency as the OCC, the Board, and the
FDIC).
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In response to these concerns, on January 4, 2012, the Bureau's
General Counsel issued a letter, CFPB Bulletin 12-01, expressing the
Bureau's considered view that the submission of privileged information
to the Bureau in response to requests made pursuant to the Bureau's
supervisory authority does not result in the waiver of any applicable
privilege a supervised entity may claim in response to a request or
demand for the same information by a third party.\15\ In its letter,
the Bureau explained that, like the prudential regulators, its
supervisory authority encompasses the authority to compel supervised
entities to provide privileged information and, therefore, a supervised
entity's submission of privileged information to the Bureau in response
to a request is not a voluntary disclosure that would result in the
waiver of any applicable privilege. Although CFPB Bulletin 12-01 was
addressed to the Bureau's supervision of large depository institutions
and credit unions and their affiliates, the same reasoning applies to
the Bureau's supervisory authority over other entities. Courts have
affirmed this view, rejecting claims that supervised entities have
waived applicable privileges by providing information to their
supervisors.\16\
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\15\ This letter is available on the Bureau's Web site at http://files.consumerfinance.gov/f/2012/01/GC_bulletin_12-01.pdf.
\16\ See. e.g., Boston Auction Co. v. W. Farm Credit Bank, 925
F. Supp. 1478, 1481-82 (D. Hawaii 1996) (no waiver where documents
provided to examiners from the Farm Credit Administration because
disclosure not voluntary); Vanguard Sav. & Loan Assn v. Banks, No.
93-cv-4267, 1995 WL 555871, at *5 (E.D.Pa. Sept. 18, 1995) (holding
that the disclosure of work product privileged information to state
bank regulator is ``involuntary'' and, therefore, does not waive the
privilege); United States v. Buco, Crim. No. 90-10252-H, 1991 WL
82459, at *2 (D. Mass. May 13, 1991) (holding that ``the public
interest served by encouraging the free flow of information between
the banks and their Federal regulators is substantial; a rule which
provided that a bank generally waived its attorney-client privilege
as to materials submitted to federal regulators would substantially
impair that interest.''). Moreover, in recognition of the need for a
frank, informal, and relatively continuous flow of communication
between supervisory agencies and the financial institutions they
supervise, courts have long held that supervisory agencies do not
waive the protections of the bank examination privilege (an offshoot
of the deliberative process privilege) by sharing privileged
information with their supervised entities. See Overby v. United
States Fid. & Guar. Co., 224 F.2d 158, 163 (5th Cir. 1955) (``We do
not think that any privilege [of the OCC] has been waived by putting
copies of the documents in the hands of directors of the bank.'');
In re Subpoena Served Upon the Comptroller of the Currency, and
Sec'y of Bd. of Governors of Fed. Reserve Sys., 967 F.2d 630, 635
(D.C. Cir. 1992) (``We do not think that sharing a bank examination
report or other supervisory information with the subject depository
institution can reasonably be thought to bear upon the continuing
need for the privilege.''). The sound reasons underlying the
preservation of the supervisory agency's privilege when it provides
information to a supervised entity apply equally to the
communication of privileged information in the opposite direction,
and support preservation of the supervised entity's privilege when
it provides privileged information to its supervisor.
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Further, when Congress transferred to the Bureau the prudential
regulators' authority to conduct examinations to assess compliance with
Federal consumer financial law by large depository institutions and
credit unions and their affiliates, it also granted to the Bureau ``all
powers and duties * * * relating'' to those transferred
authorities.\17\ This broad grant of authority provides the Bureau with
supervisory authority equivalent to that of the prudential regulators,
which includes the authority to request and receive information without
effecting a waiver of any privilege a supervised entity may claim with
respect to that information in response to a request or demand by a
third party.
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\17\ See Dodd-Frank Act Sec. 1061(b), 12 U.S.C. 5581(b).
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This conclusion is consistent with the coordinated scheme of
supervision established by Title X of the Dodd-Frank Act. The
prudential regulators and the Bureau share responsibility for
supervising large depository institutions and credit unions and are
required to coordinate their examinations and consult regarding draft
reports of examination.\18\ As noted, a supervised entity's submission
of privileged information to a prudential regulator does not waive the
privilege with respect to third parties.\19\ In addition, a prudential
regulator's provision of a supervised entity's privileged information
to the Bureau does not waive ``any privilege applicable to [the]
information.'' \20\ It would be incongruous for Congress to provide a
mechanism whereby a person could pass privileged information through a
prudential regulator to the Bureau without waiving any applicable
privilege, but could not provide the information directly to the Bureau
without waiving the privilege.
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\18\ See Dodd-Frank Act Sec. 1025(b), (e), 12 U.S.C. 5515(b),
(e).
\19\ See 12 U.S.C. 1828(x), 1785(j).
\20\ See 12 U.S.C. 1821(t).
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Furthermore, the prudential regulators retain primary
responsibility for supervising smaller depository institutions and
credit unions for compliance with Federal consumer financial law.\21\ A
central purpose of Title X of the Dodd-Frank Act was to enhance the
supervision of all entities for compliance with Federal consumer
financial law and to ensure that Federal consumer financial law is
enforced consistently.\22\ These goals would be undermined if a
supervised entity's ability to provide privileged information to
supervisory personnel without risking a waiver were to depend upon the
entity's size.
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\21\ See Dodd-Frank Act Sec. 1061(c)(1)(B), 12 U.S.C.
5581(c)(1)(B).
\22\ See Dodd-Frank Act Sec. 1021(a), 12 U.S.C. 5511(a).
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Statutes should be construed as a coherent whole and in a manner
consistent with their purpose. Accordingly, the Bureau construes its
examination authority to be equivalent to that of the prudential
regulators in this respect, and continues to adhere to the position
that the submission of privileged information in response to requests
made pursuant to the Bureau's examination authority does not result in
a waiver of any privilege with respect to third parties. Nonetheless,
in order to
[[Page 15289]]
provide maximum assurance to its supervised entities, the Bureau is
proposing to exercise its delegated rulemaking authority to prescribe a
rule intended to govern any third party's claim in Federal or State
court that a supervised entity has waived any applicable privilege by
providing information to the Bureau in the course of its supervisory or
regulatory processes.
In addition to applying to claims regarding large depository
institutions and credit unions and their affiliates, the proposed rule
will apply to third parties' claims that nondepository institutions or
other persons have waived any applicable privilege by providing
information to the Bureau in the course of its supervisory or
regulatory processes. In enacting Title X of the Dodd-Frank Act,
Congress authorized the Bureau to exercise its authority to ensure that
``Federal consumer financial law is enforced consistently, without
regard to the status of a person as a depository institution, in order
to promote fair competition.'' \23\ Indeed, Congress directed the
Bureau to ``seek to implement and, where applicable, enforce Federal
consumer financial law consistently for the purpose of ensuring that
all consumers have access to markets for consumer financial products
and services and that markets for consumer financial products and
services are fair, transparent, and competitive.'' \24\ The Bureau's
exercise of supervisory and regulatory authority over nondepository
institutions and other persons must, therefore, be consistent with its
exercise of supervisory and regulatory authority over large depository
institutions and credit unions and their affiliates. Accordingly,
consistent with the broad language of 12 U.S.C. 1828(x) adopted by the
proposed rule, the Bureau intends for the proposed rule to apply to the
submission of privileged information by any person subject to the
Bureau's supervisory or regulatory authority.
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\23\ See Dodd-Frank Act Sec. 1021(b)(4), 12 U.S.C. 5511(b)(4).
\24\ See Dodd-Frank Act Sec. 1021(a), 12 U.S.C. 5511(a)
(emphasis added); see also S. Rep. No. 111-176, at 168 (describing
as one of the purposes of section 1025 of the Dodd-Frank Act as
eliminating opportunities for ``regulatory arbitrage'').
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Once 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, as the Bureau stated in
CFPB Bulletin 12-01, 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.
B. Amendment of 12 CFR 1070.47
The Bureau also proposes to readopt in modified form its rule
regarding the effect upon any applicable privilege when the Bureau
discloses information pursuant to its authority under subpart D of its
Rules Relating to the Disclosure of Records and Information. The
proposed rule would provide as follows:
(c) Non-waiver.
(1) In General. The CFPB shall not be deemed to have waived any
privilege applicable to any information by transferring that
information to, or permitting that information to be used by, any
Federal or State agency.
(2) Rule of Construction. Paragraph (1) shall not be construed as
implying that any person waives any privilege applicable to any
information because paragraph (1) does not apply to the transfer or use
of that information.
Under subpart D, appropriate Bureau personnel are authorized to
disclose confidential information to certain individuals and entities
in certain circumstances. For example, the Bureau is authorized to
disclose, in appropriate circumstances, confidential information to
another Federal or State agency.\25\ On July 28, 2011, the Bureau
issued an interim final rule, which provides that ``[t]he provision by
the CFPB of any confidential information pursuant to this subpart does
not constitute a waiver, or otherwise affect, any privilege any agency
or person may claim with respect to such information under federal
law.'' \26\ In the preamble, the Bureau stated that this paragraph was
intended to clarify ``that disclosures of confidential information
pursuant to subpart D are not intended and should not be construed to
constitute a waiver of any privileges that are otherwise available to
the CFPB or to any agency or person with respect to this confidential
information.'' \27\ The Bureau requested comments on its interim final
rule, but did not receive any comments on this particular provision.
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\25\ See 12 CFR 1070.43.
\26\ See 12 CFR 1070.47(c).
\27\ See Interim Final Rule, 76 FR 45372, 45375-76 (July 28,
2011) (emphasis added).
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The Bureau proposes to readopt this rule in slightly modified form
to clarify that it is intended not merely to express the Bureau's
intent not to waive any applicable privilege, but to provide the
applicable rule of decision for any claim, in Federal or State court,
that the Bureau has waived any applicable privilege--whether the
privilege belongs to the Bureau, another Federal or State agency, or a
regulated entity--by sharing information with a Federal or State agency
pursuant to subpart D.\28\ The Bureau also proposes to limit the rule
to disclosures to Federal and State agencies. Congress generally
directed the Bureau to coordinate its regulatory activities with other
Federal and State agencies ``to promote consistent regulatory treatment
of consumer financial and investment products and services.'' \29\ In
addition, Congress specifically directed the Bureau to share draft and
final reports of examination with other Federal and State agencies, and
authorized the Bureau to engage in joint investigations with other
Federal and State agencies.\30\ The coordinated intergovernmental
action envisioned by Title X of the Dodd-Frank Act would be
significantly hampered if the Bureau were not able to exchange
privileged information with these agencies freely. The Bureau believes
that courts would be unlikely to find a waiver of privilege in these
circumstances. Nonetheless, in order to provide assurances comparable
to those provided by 12 U.S.C. 1821(t), the Bureau proposes to adopt a
rule providing that ``[t]he Bureau shall not be deemed to have waived
any privilege applicable to any information by transferring that
information or permitting that information to be used by any Federal or
State agency.'' In other contexts in which the Bureau discloses
information pursuant to subpart D, the Bureau expects determinations
regarding privilege waiver to be made by the courts pursuant to
otherwise applicable law.
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\28\ The Bureau believes that the prudential regulators' ability
to transfer information to other Federal agencies without effecting
a waiver is also a ``power[] * * * relating'' to the transferred
supervision authority that was granted to the Bureau by section 1061
of the Dodd-Frank Act.
\29\ See Dodd-Frank Act Sec. 1015, 12 U.S.C. 5495.
\30\ See Dodd-Frank Act Sec. Sec. 1022(c)(6)(C), 1025(e),
1052(a); 12 U.S.C. 5512(c)(6)(C); 5515(e); 5562(a).
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III. Legal Authority
A. Rulemaking Authority
The Bureau's proposed rule is based on its authority to ``prescribe
rules regarding the confidential treatment of information obtained from
persons in connection with the exercise of its authorities under
Federal consumer
[[Page 15290]]
financial laws.'' \31\ As explained above, the proposed 12 CFR 1070.48
will ensure that the confidential and privileged nature of information
obtained by the Bureau in the course of any supervisory or regulatory
process is not waived, destroyed, or modified by compliance with the
Bureau's requests for information. The proposed amendment to 12 CFR
1070.47(c) ensures that the sharing of information with Federal and
State agencies mandated or authorized by Title X of the Dodd-Frank Act
does not affect the confidential and privileged nature of the
information.
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\31\ See Dodd-Frank Act Sec. 1022(c)(6)(A); 12 U.S.C.
5512(c)(6)(A).
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In addition, the Bureau relies on its general rulemaking authority
to ``prescribe rules * * * as may be necessary or appropriate to enable
the Bureau to administer and carry out the purposes and objectives of
the Federal consumer financial laws, and to prevent evasions thereof.''
\32\ The supervision and other authorities provided by Title X of the
Dodd-Frank Act are components of ``Federal consumer financial law.'' As
explained above, the proposed rules are necessary and appropriate
measures to ensure that the Bureau is able to implement these
authorities, and to do so consistently ``without regard to the status
of a person as a depository institution, in order to promote fair
competition.'' \33\ By providing greater certainty to supervised
entities, this rule will also prevent evasions of the Bureau's
supervisory and other authorities based on concerns about the risk of
waiving privilege.
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\32\ See Dodd-Frank Act Sec. 1022(b)(1), 12 U.S.C. 5512(b)(1).
\33\ See Dodd-Frank Act Sec. 1021(b)(4), 12 U.S.C. 5511(b)(4);
see also Dodd-Frank Act Sec. 1021(a), 12 U.S.C. 5511(a).
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Finally, the Bureau also relies on its authority to ``prescribe
rules to facilitate the supervision of [nondepository institutions] and
assessment and detection of risks to consumers.'' \34\ For the reasons
discussed above, the proposed rule will facilitate the Bureau's
supervision of nondepository institutions and thereby enhance the
Bureau's ability to assess and detect risks to consumers.
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\34\ See Dodd-Frank Act Sec. 1024(b)(7)(A), 12 U.S.C.
5514(b)(7)(A). This rulemaking does not concern supervisory
requirements or coordinated registration systems for nondepository
institutions. Accordingly, the Bureau has determined that
consultation with state agencies is not appropriate. See Dodd-Frank
Act Sec. 1024(b)(7)(D); 12 U.S.C. 5514(b)(7)(D).
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B. Section 1022(b)(2) of the Dodd-Frank Act
In developing the proposed rule, the Bureau has conducted an
analysis of potential benefits, costs, and impacts, and has consulted
or offered to consult with the prudential regulators and the Federal
Trade Commission, including regarding consistency with any prudential,
market, or systemic objectives administered by such agencies.\35\
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\35\ Specifically, section 1022(b)(2)(A) calls for the Bureau to
consider the potential benefits and costs of a regulation to
consumers and covered persons, including the potential reduction of
access by consumers to consumer financial products or services; the
impact on depository institutions and credit unions with $10 billion
or less in total assets as described in section 1026 of the Act; and
the impact on consumers in rural areas. The manner and extent to
which the provisions of section 1022(b)(2) apply to a rule of this
kind that does not establish standards of conduct is unclear.
Nevertheless, to inform this rulemaking more fully, the Bureau
performed the described analyses and consultations.
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The proposed rule provides that the submission by any person of
information to the Bureau in the course of the Bureau's supervisory or
regulatory processes does not waive or otherwise affect any privilege
such person may claim with respect to such information under Federal or
State law as to any other person or entity. The proposed rule also
provides that the Bureau's provision of privileged information to
another Federal or State agency does not waive any applicable
privilege.
As explained above, the Bureau believes that the submission by any
person of any information to the Bureau in the course of the Bureau's
supervisory or regulatory processes, or the Bureau's transfer of
privileged information to other Federal and State agencies, generally
does not waive or otherwise affect any privilege a person may claim
with respect to such information under Federal or State law as to any
other person or entity. The proposed rule would codify this
understanding in order to provide entities subject to the Bureau's
supervisory or regulatory authority further assurances that the
submission of privileged information to the Bureau, or the Bureau's
subsequent transmission of the information to other government
agencies, will not affect the privileged and confidential nature of the
information. Because the proposed rule generally will not result in a
determination regarding the privileged nature of information different
than that which would have been reached in the absence of the rule, the
proposed rule is not expected to impose any costs on consumers or
covered persons or to impact consumers' access to consumer financial
products or services. Notably, the rule does not impose obligations on
covered persons to provide information; rather, any requirement to
provide information stems from the Bureau's authority under existing
law.
Assuming, however, that the proposed rule would result in a
determination regarding the privileged nature of information different
than that which would be reached under existing law, the proposed rule
would benefit covered persons by protecting any applicable privilege a
covered person that provides information to the Bureau may claim in
response to a third party's claim of waiver. Furthermore, in that
scenario, the proposed rule could impose a potential cost on consumers
or covered persons involved in subsequent third-party litigation
regarding a supervised entity to the extent the rule, as opposed to
existing law, prevents them from compelling privileged information
subject to the rule pursuant to a theory of waiver.
Finally, the proposed rule has no unique impact on insured
depository institutions or insured credit unions with less than
$10,000,000,000 in assets as described in section 1026 of the Dodd-
Frank Act. Nor does the proposed rule have a unique impact on rural
consumers.
The Bureau requests comments on the potential benefits, costs, and
impacts of the proposal.
IV. Request for Comment
The Bureau invites comments on all aspects of this notice and the
proposed rule, including the proposed rule's scope.
V. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA), as amended by the Small
Business Regulatory Enforcement Fairness Act of 1996, requires each
agency to consider the potential impact of its regulations on small
entities, including small businesses, small governmental units, and
small not-for-profit organizations.
The RFA generally requires an agency to conduct an initial
regulatory flexibility analysis (IRFA) and a final regulatory
flexibility analysis (FRFA) of any rule subject to notice-and-comment
rulemaking requirements, unless the agency certifies that the rule will
not have a significant economic impact on a substantial number of small
entities. The Bureau also is subject to certain additional procedures
under the RFA involving the convening of a panel to consult with small
business
[[Page 15291]]
representatives prior to proposing a rule for which an IRFA is
required.
When an agency issues a rulemaking proposal, the RFA requires the
agency to, ``prepare and make available for public comment an initial
regulatory flexibility analysis,'' which will ``describe the impact of
the proposed rule on small entities.'' The RFA allows an agency to
certify a rule, in lieu of preparing an analysis, if the proposed
rulemaking is not expected to have a significant economic impact on a
substantial number of small entities.
An IRFA is not required for this proposal because, if adopted, it
would not have a significant economic impact on a substantial number of
small entities. The proposed rule does not impose obligations or
standards of conduct on any entities. In any event, as noted, the
submission by any person of any information to the Bureau in the course
of the Bureau's supervisory or regulatory processes or the Bureau's
later disclosure of such submitted material generally does not waive or
otherwise affect any privilege such person may claim with respect to
such information under Federal or State law as to any other person or
entity. The proposed rule is intended to codify this result in order to
give further assurance to entities subject to the Bureau's authority.
Any requirement to provide information stems from the Bureau's
authority under existing law, not the proposed rule. To the extent that
the proposed rule alters existing law, it protects any applicable
privilege under Federal or State law that a covered person that
provides information to the Bureau may claim.
Accordingly, the undersigned hereby certifies that, if promulgated,
the proposed rule will not have a significant economic impact on a
substantial number of small entities.
List of Subjects in 12 CFR Part 1070, Subpart D
Confidential business information, Consumer protection, Privacy.
Authority and Issuance
For the reasons set forth in the preamble, the Bureau proposes to
amend 12 CFR part 1070, subpart D, as set forth below:
PART 1070--DISCLOSURES OF RECORDS AND INFORMATION
Subpart D--Confidential Information
1. The authority citation for part 1070 continues to read as
follows:
Authority: 12 U.S.C. 3401; 12 U.S.C. 5481 et seq.; 5 U.S.C. 552;
5 U.S.C. 552a; 18 U.S.C. 1905; 18 U.S.C. 641; 44 U.S.C. ch. 30; 5
U.S.C. 301.
2. Amend Sec. 1070.47 by revising paragraph (c) to read as
follows:
Sec. 1070.47 Other Rules Regarding Disclosure of Confidential
Information.
* * * * *
(c) Non-waiver. (1) In General. The CFPB shall not be deemed to
have waived any privilege applicable to any information by transferring
that information to, or permitting that information to be used by, any
Federal or State agency.
(2) Rule of Construction. Paragraph (1) shall not be construed as
implying that any person waives any privilege applicable to any
information because paragraph (1) does not apply to the transfer or use
of that information.
3. Add Sec. 1070.48 to subpart D to read as follows:
Sec. 1070.48 Privileges not affected by disclosure to the CFPB.
(a) In General. The submission by any person of any information to
the CFPB for any purpose in the course of any supervisory or regulatory
process of the Bureau shall not be construed as waiving, destroying, or
otherwise affecting any privilege such person may claim with respect to
such information under Federal or State law as to any person or entity
other than the CFPB.
(b) Rule of Construction. Paragraph (a) shall not be construed as
implying or establishing that--
(1) Any person waives any privilege applicable to information that
is submitted or transferred under circumstances to which paragraph (a)
does not apply; or
(2) Any person would waive any privilege applicable to any
information by submitting the information to the CFPB but for this
section.
Dated: March 12, 2012.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2012-6254 Filed 3-14-12; 8:45 am]
BILLING CODE 4810-AM-P