[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]


========================================================================
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.

========================================================================


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.

-----------------------------------------------------------------------

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:
    <bullet> Electronic: http://www.regulations.gov. Follow the 
instructions for submitting comments.
    <bullet> Mail: Monica Jackson, Office of the Executive Secretary, 
Consumer Financial Protection Bureau, 1700 G Street NW., Washington, DC 
20552.
    <bullet> 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.''
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \8\ See 12 U.S.C. 1785(j), 1828(x).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.'').
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \17\ See Dodd-Frank Act Sec.  1061(b), 12 U.S.C. 5581(b).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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'').
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \31\ See Dodd-Frank Act Sec.  1022(c)(6)(A); 12 U.S.C. 
5512(c)(6)(A).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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