Materials sent by banks to bureau must remain privileged, ABA urges

The American Bar Association is urging Congress to create a single, consistent standard for the treatment of privileged information submitted to all federal agencies that supervise banks, including the newly created Consumer Financial Protection Bureau. Such a standard would be established by H.R. 4014 and S. 2099. The House Financial Services Committee recently approved the House version, which now moves to the full House for further consideration. The Senate companion bill has been referred to the Senate Banking, Housing and Urban Affairs Committee whose chairman, Tim Johnson (D-S.D.), and ranking member, Richard Shelby (R-Ala.), are co-sponsors. In Feb. 21 letters to key House and Senate leaders, ABA President Wm. T. (Bill) Robinson III notes that although it is settled law that privileged materials shared with federal banking agencies remain privileged as to all other parties, the creation of the Consumer Financial Protection Bureau requires that the relevant statutes, 12 U.S.C. § 1828(x) and 12 U.S.C. § 1821(t), be updated. "'Federal banking agency' is a defined term in the Federal Deposit Insurance Act, and that definition does not explicitly include the new Bureau," the ABA letters point out. They quote bureau director Richard Cordray, who has acknowledged "real concern" over the issue and expressed support for legislation that would resolve any doubt. The bills "take the important step of adding the Bureau to the list of agencies that may share privileged information with other agencies specified in the statute without causing a waiver," the letters state. "The attorney-client privilege," the ABA explained, "is a bedrock legal principle that enables both individual and organizational clients to communicate with their lawyers in confidence, and it encourages clients to seek out and obtain guidance to conform their conduct to the law. The privilege also facilitates self-investigation into past conduct to identify shortcomings and remedy problems, to the benefit of society at large." Therefore, the ABA letter continued, "the ABA strongly supports the preservation of the attorney-client privilege and opposes government policies, practices and procedures that have the effect of eroding the privilege." In addition to protecting the privilege, the ABA also noted that the bills would advance several important financial reform principles developed by the ABA Task Force on Financial Markets Regulatory Reform and adopted by the association in 2009. In particular, the bills would "help ensure a more integrated, consistent and coordinated approach to the regulation of financial services providers" and also would promote "uniform treatment of privileged materials by the Federal banking regulators and the CFPB," according to the ABA. The ABA's letter to key House leaders can be found online at www.americanbar.org. Published: Mon, Feb 27, 2012