[Congressional Record Volume 160, Number 120 (Tuesday, July 29, 2014)]
[House]
[Pages H6998-H7002]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
EXAMINATION AND SUPERVISORY PRIVILEGE PARITY ACT OF 2014
Mrs. CAPITO. Mr. Speaker, I move to suspend the rules and pass the
bill (H.R. 5062) to amend the Consumer Financial Protection Act of 2010
to specify that privilege is maintained when information is shared by
certain nondepository covered persons with Federal and State financial
regulators, and for other purposes, as amended.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 5062
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Examination and Supervisory
Privilege Parity Act of 2014''.
SEC. 2. PRIVILEGE OF INFORMATION SHARED BY CERTAIN
NONDEPOSITORY COVERED PERSONS.
Section 1024(b)(3) of the Consumer Financial Protection Act
of 2010 (12 U.S.C. 5514(b)(3)) is amended--
(1) by striking ``regulators and the State bank regulatory
authorities'' and inserting ``regulators, the State bank
regulatory authorities, and the State agencies that licence,
supervise, or examine the offering of consumer financial
products or services''; and
(2) by adding at the end the following: ``The sharing of
information with such regulators, authorities, and agencies
shall not be construed as waiving, destroying, or otherwise
affecting any privilege or confidentiality such person may
claim with respect to such information under Federal or State
law as to any person or entity other than such Bureau,
agency, supervisor, or authority.''.
The SPEAKER pro tempore (Mr. Rodney Davis of Illinois). Pursuant to
the rule, the gentlewoman from West Virginia (Mrs. Capito) and the
gentleman from Colorado (Mr. Perlmutter) each will control 20 minutes.
The Chair recognizes the gentlewoman from West Virginia.
General Leave
Mrs. CAPITO. Mr. Speaker, I ask unanimous consent that all Members
have 5 legislative days within which to revise and extend their remarks
and submit any extraneous materials for the Record on H.R. 5062, as
amended, currently under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentlewoman from West Virginia?
There was no objection.
Mrs. CAPITO. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, this bill is very similar to the previous bill that we
just passed. I rise in support of H.R. 5062, the Examination and
Supervisory Privilege Parity Act of 2014--we always want to have a
nice, long name for everything--and congratulate my colleagues on the
Financial Services Committee, Mr. Perlmutter and Mr. Barr, for their
hard work on advancing this legislation.
This bill clarifies that the sharing of information between Federal
banking regulators and State agencies that license, supervise, or
examine the offering of consumer financial products or services will
not be construed as waiving, destroying, or otherwise affecting any
privilege or confidentiality right that a person could claim.
Americans are familiar with the concept of privilege. Under current
law, legal privilege exists with respect to certain communications, so
long as they are not shared with a third party. Attorney-client
privilege, for example, is destroyed if the client shares what he
communicated to his attorney with his colleague at work.
This legislation provides assurance for financial institutions that
privileged information shared between Federal banking regulators and
State regulatory agencies will be protected and remain confidential.
This will encourage a greater amount of sharing between institutions
and their regulators and will allow our Nation's financial regulators
to do their jobs to ensure that our financial institutions are
operating lawfully while, at the same time, able to offer consumer
credit products that are critical to Americans to finance their
everyday purchases and start small businesses.
The Examination and Supervisory Privilege Parity Act is a simple
bipartisan bill that clarifies that this is not always the case. I,
again, congratulate Mr. Barr and Mr. Perlmutter on their work, and I
would reserve the balance of my time.
Mr. PERLMUTTER. Mr. Speaker, I yield myself as much time as I might
consume.
Mr. Speaker, I rise in support of H.R. 5062, the Examination and
Supervisory Privilege Parity Act, which is difficult to say, but easy
to understand. It is to provide for full cooperation, discourse, and
communication among regulators while, at the same time, preserving some
confidentiality and protections for those whose books and records are
being reviewed. I want to thank my friend, Congressman Barr, for
working with me on this legislation.
This legislation accomplishes two important things. First, it reduces
regulatory burden by ensuring Federal regulators; the CFPB; State
banking agencies; and, now, nonbank agencies may coordinate their
respective examination schedules. Two, it provides parity to ensure
privilege is not compromised when regulated entities turn over
sensitive information to their regulators and when that information is
subsequently shared among State and Federal agencies.
The Dodd-Frank legislation empowered the Consumer Financial
Protection Bureau to regulate, supervise, and examine providers of
consumer credit and financial products. Among these companies, nonbank
financial institutions are typically State-licensed, and their primary
regulator is often the State banking commissioner.
[[Page H6999]]
However, in 15 States, such entities are overseen by a nonbank
agency, such as the attorney general, the Department of Consumer and
Regulatory Affairs, or a dedicated consumer credit commissioner.
The bill extends the same protections that apply to all consumer
creditors to ensure an effective and equitable examination and
investigatory process.
Under the Federal Deposit Insurance Act, similar protections exist
for banks which benefit from express legal protection that provides the
confidence and legal certainty to turn over privileged information and
documents at the request of their regulators.
This protection encourages regulated entities to comply with the
examinations and mitigates their anxiety about disclosing sensitive
proprietary information to regulators. Sharing of information will not
waive attorney-client, work product, or other privileges recognized
under Federal or State law.
Let me be clear, a firm cannot turn over any information to their
regulators they choose to benefit from the extension of privilege and
shield themselves from third-party lawsuits. Privilege of information
only extends to the information requested by the regulators during the
course of supervisory examinations per State and Federal law.
Additionally, the bill codifies the CFPB guidance bulletin and
regulation that says the ``confidential treatment of information that
would provide that any person's submission of information to the Bureau
in the course of the Bureau's supervisory or regulatory processes will
not waive any privilege such person may claim with respect to such
information.''
They go on to state that the rule is intended to ``provide
protections for the confidentiality of privileged information
substantively identical to the statutory provisions that apply to the
submission of privileged information to the prudential regulators and
State and foreign bank regulators.''
However, this bill will extend protections to nonbank State
regulators, such as the attorney general in Colorado and those
regulated entities.
I am a strong supporter and believer in the Dodd-Frank Wall Street
Reform and Consumer Protection Act, but I also know certain technical
fixes need to be made. That is why I urge passage of this bill
introduced by my friend, Mr. Barr.
With that, I will reserve the balance of my time.
Mrs. CAPITO. Mr. Speaker, I now yield such time as he may consume to
the gentleman from Kentucky (Mr. Barr), the author of the bill and a
great member of the Financial Services Committee.
Mr. BARR. Mr. Speaker, I thank the gentlewoman for yielding, and I
appreciate her leadership as the chairman of the Financial Institutions
Subcommittee and for her support of this important legislation.
Mr. Speaker, I rise in support of H.R. 5062, the Examination and
Supervisory Privilege Parity Act, and I want to thank the gentleman
from Colorado, my friend, Mr. Perlmutter, for working with me in a
bipartisan fashion to introduce and advance this legislation.
In central Kentucky, one of our signature industries is the auto
manufacturing industry, and no place exemplifies this proud fact more
than Toyota Motor Manufacturing of Kentucky and the plant that is
located in my district in Georgetown, Kentucky.
With over 7,300 Toyota team members and their families dependent on
these high-quality jobs in that facility, I am committed to doing
everything I can to support these Kentucky workers. This legislation
does that.
H.R. 5062 is, as my friend from Colorado said, a technical fix, but
it is an important piece of legislation because it helps automobile
finance companies like Toyota Financial Services, which finances over
two-thirds of new vehicle sales for Toyota customers.
This legislation assures these consumer lenders that when they
provide confidential and privileged information to their regulators in
the course of supervision, the customary privilege or confidentiality
of that information is not waived when shared with the State regulatory
agencies.
This is necessary because the unintended fragmented structure of
current law leaves privileged and confidential status of this
information in question, and that poses a significant risk to auto
finance companies.
Consumer access to finance is vital for new car sales and a healthy
car market, and a healthy car market is good for the 7,300 automobile
manufacturing workers in central Kentucky and all around America.
Mr. Speaker, I urge support for this legislation which, again, simply
guaranties that when the Consumer Financial Protection Bureau asks for
confidential and privileged information from a captive finance company
and then shares that information with a State regulator, that
information shared will continue to be treated as privileged and
confidential. I urge support for this legislation.
Mr. PERLMUTTER. Mr. Speaker, I first would like to introduce into the
Record, speaking of Toyota, a letter dated July 14, to myself and to
Mr. Barr; a letter from the Financial Services Roundtable dated July
29, 2014; a letter from Honda dated July 15; a letter from the
Conference of State Bank Supervisors dated July 15; and a letter from
the American Financial Services Association dated July 25.
Toyota Motor North America, Inc.,
Washington, DC, July 14, 2014.
Hon. Ed Perlmutter,
Longworth House Office Building,
Washington, DC.
Hon. Andy Barr,
Longworth House Office Building,
Washington, DC.
Dear Congressmen Perlmutter and Barr: On behalf of the over
30,000 Toyota Team members in the U.S., thank you for
introducing H.R. 5062, the Examination and Supervisory
Privilege Parity Act of 2014. We appreciate your commitment
to common sense regulatory reform.
Consumer access to finance is the life blood of new car
sales. To maintain competitiveness, automobile manufacturers
must have a strong vehicle finance division. These ``captive
finance companies'', like Toyota Financial Services, provide
tailored financing options to our customers, whether they be
individual consumers or franchised dealers. As a captive,
Toyota Financial Services exist solely to support the auto
manufacturer in selling vehicles and are designed to maintain
a long-term, positive, customer relationship with the
consumer.
As you know, the Dodd-Frank Act placed captive finance
companies under the jurisdiction of the newly created
Consumer Financial Protection Bureau (CFPB). However, in a
technical oversight, the Act did not extend the traditional
protections of privilege over nonpublic, proprietary
information--often disclosed in the course of supervision--to
either the CFPB or the state agencies that jointly oversee
captive finance companies under the CFPB's jurisdiction.
A strong supervisory privilege plays an important role in
supporting an effective and open examination process.
Straightforward communications between regulators and the
regulated entities are critical, and are made possible by the
extension of privilege. Once lost, privilege cannot be
restored.
H.R. 5062 corrects this oversight by simply guaranteeing
that when captive finance companies produce information to
the CFPB, the privileged status of that information is
preserved when the CFPB shares the information with state
regulation agencies.
At Toyota, we support H.R. 5062 and appreciate your taking
the time to learn about this issue.
Sincerely,
Stephen Ciccone,
Group Vice President, Government Affairs.
____
Financial Services Roundtable,
Washington, DC, July 29, 2014.
Hon. Ed Perlmutter,
House of Representatives,
Washington, DC.
Hon. Andy Barr,
House of Representatives,
Washington, DC.
Dear Representatives Perlmutter and Barr: The Financial
Services Roundtable (FSR) commends your sponsorship of H.R.
5062, ``The Examination and Supervisory Privilege Parity Act
of 2014'', which seeks to ensure the protection of shared
privileged information. FSR supports this legislation and
urges the House to pass it at the earliest possible date.
The legislation provides assurance for financial
institutions that privileged information shared between
federal banking regulators and state regulatory agencies will
be protected and remain confidential. While the Consumer
Financial Protection Bureau (CFPB) has acted to protect
confidential information obtained through the supervisory
process, this legislation provides additional assurance that
when the CFPB shares supervisory information with federal and
state regulators--including any state agency that licenses,
supervises or examines the offering of consumer financial
products or services, that the confidential nature of the
information will be protected.
We strongly support H.R. 5062 and urge its passage. Thank
you for the consideration, and please do not hesitate to
contact me if you would like to discuss this matter further.
Sincerely,
Francis Creighton,
[[Page H7000]]
Executive Vice President, Government Affairs, Financial
Services Roundtable.
____
Honda North America, Inc.,
Washington, DC, July 15, 2014.
Hon. Shelley Moore Capito,
Chairwoman, Subcommittee on Financial Institutions and
Consumer Credit, Committee on Financial Services,
Washington, DC.
Hon. Gregory W. Meeks,
Ranking Member, Subcommittee on Financial Institutions and
Consumer Credit, Committee on Financial Services,
Washington, DC.
Dear Chairwoman Capito and Ranking Member Meeks: Thank you
and the Subcommittee on Financial Institutions and Consumer
Credit for considering H.R. 5062, the Examination and
Supervisory Privilege Parity Act of 2014, introduced by
Congressmen Ed Perlmutter and Andy Barr during today's
hearing entitled, ``Examining Regulatory Relief Proposals for
Community Financial Institutions Part II.'' Honda supports
H.R. 5062 because its passage would ensure the protection of
privileged supervisory information shared with and by the
Consumer Financial Protection Bureau (CFPB) for nondepository
financial institutions.
The Dodd-Frank Wall Street Reform and Consumer Protection
Act (the ``Act'') gave the CFPB the authority to regulate and
supervise a number of institutions that provide consumer
financial products or services, and to the extent the CFPB
may finalize its ``larger participant'' rule for the auto
finance market (expected in 2015), we anticipate these
institutions will include captive vehicle finance companies
like Honda. However, state agencies also regulate captive
vehicle finance companies, and it is important to preserve
the privilege of supervisory information that regulated
entities share with the CFPB, particularly because the CFPB
is expected to share such information and coordinate
examinations with state regulatory agencies.
Although Congress passed H.R. 4014 in late 2012 (P.L. 112-
215) to address the privilege issue, that law only protects
the privilege of information in those states where state bank
supervisors regulate the consumer financial product or
service. However, there are 15 states where a state agency,
other than a state bank supervisor, has jurisdiction over the
offering of consumer financial products or services; for
example, in Texas, the governing body is the Office of the
Consumer Credit Commissioner (OCCC). As a result of these
differences in regulatory regimes, a question remains as to
whether the sharing of supervisory information with those
types of agencies would result in a waiver of privilege. H.R.
5062 would clarify that such sharing between the CFPB and
prudential regulators, state bank regulatory authorities, as
well as other state agencies that license, supervise, or
examine the offering of consumer financial products or
services, would not be ``construed as waiving, destroying, or
otherwise affecting any privilege'' a financial institution
could claim. With the CFPB working to develop its supervisory
program for ``larger participants'' in the auto lending
market, it has become critical to establish parity for the
protection of privileged information among all financial
institutions.
We hope that the Subcommittee and the Full Committee on
Financial Services can take immediate action on H.R. 5062.
Thank you again for your consideration. If you need any
additional information, please contact me.
Sincerely,
Tara Hairston,
Government & Industry Relations,
Honda North America, Inc.
____
Conference of State
Bank Supervisors,
Washington, DC, July 15, 2014.
Representative Ed Perlmutter,
Longworth House Office Building,
Washington, DC.
Representative Andy Barr,
Longworth House Office Building,
Washington, DC.
Dear Representatives Perlmutter and Barr: On behalf of the
Conference of State Bank Supervisors (``CSBS''), I am writing
to express our support of your bill, H.R. 5062, which ensures
privileged information is protected when shared with and
among regulators. As state regulators responsible for
overseeing a variety of depository and non-depository
financial services providers, our members strongly support
your effort to ensure consistent treatment across regulated
entities and regulatory agencies.
Effective and efficient financial regulation requires
collaboration between state and federal regulators.
Information sharing is the lynchpin of this partnership. The
creation of the Consumer Financial Protection Bureau
(``CFPB'') with jurisdiction over an array of entities
regulated at both the federal and state level makes this
coordination and uniform treatment of information even more
critical. By correcting current gaps in the law, this bill
improves regulators' ability to coordinate and provides
regulated entities with greater confidence that privileged
information provided to regulators retains federal and state
legal protections.
As you and your colleagues consider this bill, CSBS
recommends improving the bill by adding confidentiality to
the covered information protection. Not all states confer
privilege upon information shared with regulators. Instead,
such information is usually treated as confidential under
state law. By adding ``and confidentiality'' after
``privilege'' the bill will address all intended scenarios
for protection of sensitive information.
CSBS is committed to working with you to ensure that H.R.
5062 becomes law and urge you and your colleagues to pass the
bill.
Sincerely,
John W. Ryan,
President & CEO.
____
American Financial
Services Association,
July 25, 2014.
Re H.R. 5062, ``Examination and Supervisory Privilege Parity
Act of 2014''
Hon. Ed Perlmutter,
House of Representatives,
Washington, DC.
Hon. Andy Barr,
House of Representatives,
Washington, DC.
Dear Congressmen: On behalf of the American Financial
Services Association (AFSA) and our more than 350 members,
write in support of your legislation, H.R. 5062, the
``Examination and Supervisory Privilege Parity Act of 2014.''
We applaud your efforts to ensure that the nonpublic,
proprietary information of nonbank consumer finance companies
remains privileged, wherever applicable, throughout the
course of supervision at the federal and state levels. AFSA
believes this to be a key step in promoting a candid and
efficient supervisory relationship between financial
regulators and the entities they oversee.
Background on Supervisory Privilege
A strong supervisory privilege plays an important role in
supporting an effective and open examination process.
Straightforward communications between regulators and the
regulated entities are critical, and are made possible by the
maintenance of privilege. There is precedent for this degree
of protection in the longtime practice by bank regulators of
asserting the confidentiality of records related to entities
under their supervision, and resisting the efforts of third-
party litigants to discover such information.
Status of the Nonpublic, Proprietary Information of Nonbanks
In establishing the Consumer Financial Protection Bureau
(CFPB), Congress neglected to extend bank supervisors'
historical protections over privileged information to either
the CFPB or the state regulators of nonbanks, with whom the
Bureau is expected to share information and coordinate
examinations. Therefore, the proprietary information of
nonbank consumer finance companies does not enjoy the same
legal protections as that of banks when disclosed during the
course of supervision or other regulatory processes.
Recognizing the importance of promoting effective
supervision, Congress enacted H.R. 4014 in December 2012 to
protect privileged information disclosed to the CFPB by
covered persons. H.R. 4014 amended the Federal Deposit
Insurance Act (FDI Act) to add the CFPB to the list of
federal regulators with whom no applicable privilege is
waived when disclosing privileged information by or about a
company under supervision. The FDI Act also permits
enumerated agencies to share such privileged information with
``state bank supervisors'' without waiving the privilege.
However, in the case of a nonbank institution, federal law
currently provides comprehensive protection of existing
privilege if and only if the company does business
exclusively in states where it is regulated by state bank
supervisors, per se.
Current Law Provides Uneven Protections for Nonbanks
Across the country, nonbank consumer finance companies do
not always fall under the jurisdiction of state bank
supervisors. In fact, there are at least 15 states where an
agency other than the state bank supervisor currently has
either partial or full jurisdiction over nonbanks offering
consumer credit in that state. This exposes such entities to
significant legal risk, given the uncertainty surrounding
whether privilege will withstand the transfer of information
by the CFPB to, and among, state agencies not specifically
referenced in federal law. Such uncertainty will necessarily
chill communications between the CFPB and the companies it
supervises, undermining the agency's effectiveness.
With the CFPB conducting examinations of state-regulated
nondepository financial institutions, it is imperative for
Congress to extend all applicable privileges to the range of
institutions subject to supervision by the Bureau. Congress
should ensure that the same protections apply to all consumer
creditors to ensure an effective and equitable examination
and investigatory process.
AFSA Urges Congress to Enact H.R. 5062
H.R. 5062 would amend the Consumer Financial Protection Act
of 2010 to specify that privilege is maintained when
information is shared by certain nondepository covered
persons with federal and state financial regulators. AFSA
believes this bill will achieve parity in the statutory
treatment of nonpublic, proprietary information disclosed by
nondepository financial institutions with that of their
depository peers, and will thereby promote greater candor
with regulators and more efficient regulation. AFSA urges
Congress to advance this legislation at the soonest possible
opportunity, as covered persons face greater risk to the
sanctity of their proprietary information as they disclose
more documents to the CFPB with each passing day.
[[Page H7001]]
AFSA looks forward to working with you to address this
matter. If you have any questions, please contact me.
Sincerely,
Bill Himpler,
Executive Vice President,
American Financial Services Association.
{time} 1415
Mr. PERLMUTTER. Since there are no other speakers on the majority
side of the aisle, I will close as well.
Mr. Speaker, this is very similar to the bill we just heard. It
really is trying to do two things. One, add the cooperation among
Federal and State regulators and potential companies, individuals who
might be under examination by those regulators, so that the individual
or company who is providing information to the regulators knows that
that information maintains protections and confidentiality and
privilege in those respects. So we are seeking additional cooperation
and additional communication.
This bill that Congressman Barr and I have introduced I think gets to
those two key goals. Again, the purpose is so that the regulators
understand what it is that they are examining and have as much
information as possible, and that they get full cooperation from those
that are being examined. So I thank my friend for introducing this
bill.
With that, I yield back the balance of my time.
Mrs. CAPITO. Mr. Speaker, I again would like to thank the sponsors of
the legislation, Mr. Barr and Mr. Perlmutter, for working together to
seek a fix that will result in good things for the coordination aspect
of the State regulators and Federal regulators. I encourage passage of
the bill.
With that, I yield back the balance of my time.
Mr. PERLMUTTER. Mr. Speaker, I submit the following letter of support
of H.R. 5062.
July 25, 2013.
Re Supervisory Privilege for Nondepository Consumer Lenders
Hon. Tim Johnson,
Chairman, Senate Banking Committee, Washington, DC.
Hon. Mike Crapo,
Ranking Member, Senate Banking Committee, Washington, DC.
Hon. Jeb Hensarling,
Chairman, House Financial Services Committee, Washington, DC.
Hon. Maxine Waters,
Ranking Member, House Financial Services Committee,
Washington, DC.
Dear Chairmen and Ranking Members: The American Financial
Services Association (``AFSA'') and the undersigned
automobile finance companies ask for your support to ensure
the privilege protection for state licensed and regulated
nondepository consumer lenders under the jurisdiction of the
Consumer Financial Protection Bureau (``CFPB'' or ``Bureau'')
is fully extended to all such companies and their privileged
information--regardless of which state agency happens to be
their regulator.
The Dodd-Frank Act and Privilege
While the Dodd-Frank Act (``Act'') granted the CFPB
authority to regulate and supervise a wide range of
depository institutions and nondepository consumer lenders,
the Act neglected to extend the historical protections over
privileged information submitted to bank supervisors, during
the course of supervision, to either the CFPB or certain
state agencies with whom the Bureau is expected to share
information and coordinate examinations.
A Flawed Solution
The enactment of H.R. 4014 during the 112th Congress sought
to resolve the problem by amending the Federal Deposit
Insurance Act (``FDI Act'') to add the CFPB to the list of
federal regulators approved to share information without
waiving any applicable privilege. The FDI Act also permits
enumerated agencies to share privileged information with
``state bank supervisors'' without waiving privilege.
However, in the case of a nondepository consumer lender, H.R.
4014 provides comprehensive protection of privilege if and
only if the company does business exclusively in states where
it is regulated by state bank supervisors.
Nondepository consumer lenders, however, do not always fall
under the jurisdiction of state bank supervisors. According
to an informal survey conducted by AFSA, there are at least
15 states where a state agency other than the state bank
supervisor currently has either partial or full jurisdiction
over the financial activities of nonbanks doing business in
that state. For example, in Texas, the Office of the Consumer
Credit Commissioner regulates nondepository consumer lenders,
and in Colorado, the state Attorney General regulates such
entities. In addition, states periodically reorganize their
regulatory regimes--raising the issue of whether a
nondepository consumer lender currently under a state's
banking agency would be protected if the state changes its
regulatory regime in the future.
We ask that nondepository consumer lenders are universally
afforded the customary and historical protections of
privilege when the CFPB and other regulators share such
privileged information with any applicable state agency with
supervisory oversight over such companies. Our goal is to
provide parity among financial institutions of all types, and
we do not seek to advantage any class of creditor.
The Necessity of Privilege
It is important to emphasize the critical role that
privilege plays in supporting a more effective and
transparent supervisory process between regulators and
regulated entities, as effective examinations are enhanced by
the privilege. Indeed, the Court of Appeals for the D.C.
Circuit expounded as follows:
The bank examination privilege is firmly rooted in
practical necessity. Bank safety and soundness supervision is
an iterative process of comment by the regulators and
response by the bank. The success of the supervision
therefore depends vitally upon the quality of communication
between the regulated banking firm and the bank regulatory
agency. This relationship is both extensive and informal. It
is extensive in that bank examiners concern themselves with
all manner of a bank's affairs. . . Because bank supervision
is relatively informal and more or less continuous, so too
must be the flow of communication between the bank and the
regulatory agency Bank management must be open and
forthcoming in response to the inquiries of bank examiners,
and the examiners must in turn be frank in expressing their
concerns about the bank. These conditions simply could not be
met as well if communications between the bank and its
regulators were not privileged. (Emphasis added.)
We believe the same policy should apply to all consumer
creditors to ensure effective and equitable examination and
investigatory processes.
Partial Privilege is No Privilege
The CFPB operates under a rather rigid document called the
Enforcement Action Process, which provides that an
investigation begins with a civil investigative demand (CID),
``which can easily be 20 or 30 pages long, [and] request
almost every imaginable relevant piece of documentary
evidence.'' Companies typically have ten days to draft an
initial response, and companies like automobile finance
companies that operate under all 50 state regulatory regimes
could be compelled to provide information that, while
privileged in some states in which the company is licensed,
would not be in other states.
Once lost, privilege cannot be restored, leaving formerly
privileged documents produced to the CFPB subject to
discovery by third parties. Moreover, the consequences of
privilege waiver can be significantly compounded if a court
rules that the privilege was waived not only as to the
individual document or documents actually produced to the
CFPB, but as to all information relating to that subject
matter. The following example illustrates the point: in
responding to a CID issued by the CFPB, an automobile finance
company might feel compelled to produce an otherwise
privileged internal memorandum on Topic X; the CFPB shares
this memorandum with non-banking regulators in States A, B
and C, all of which regulate the finance company. Assume for
this hypothetical that the CFPB and States A, B and C all
ultimately agree with the memorandum's conclusions on Topic
X, and decide to take no action against the finance company.
Under the current framework, the privileged nature of that
memorandum is likely lost and any private litigant can seek
(and possibly obtain) production of the memorandum. This is
bad enough, essentially eviscerating the privilege. Worse is
the possibility that a court might conclude that not only is
the privilege waived as to the memorandum, but also as to all
finance company documents relating to the topic in question.
Congressional Intervention is Paramount
Even in an instance where the CFPB may agree to respect
privilege in all states, it is unclear whether the Bureau
could effectuate that protection. For example, although the
CFPB promulgated a rule governing privilege, it has not
addressed this particular issue regarding gaps in its
statutory authority. Further, even if so inclined, it is
unclear that the CFPB could assist a company attempting to
defend privilege in a law suit brought by a third party
attempting to discover privileged material.
We note that, while the federal banking agencies had
similar rules in place, Congress--believing a statute was
necessary to safeguard privilege--enacted 12 U.S.C. 1828(x)
to ensure that any privileged work product or protected
materials that banks disclose in the course of supervision
remain privileged as to all other parties.
We respectfully request that the House Financial Services
Committee and the Senate Banking Committee act decisively and
without delay to establish parity among all lenders by
advancing legislation to reaffirm full privilege protection
to all types of financial institutions.
Thank you for your consideration. Should you need any
additional information, please contact AFSA's Executive Vice
President, Bill Himpler, at (202) 466-8616 or
[email protected].
Sincerely,
Katherine Adkins, General Counsel and Vice President,
Legal & Compliance, Toyota Financial Services,
Torrance, California;
[[Page H7002]]
Stephen P. Artusi, Vice President and General Counsel,
World Omni Financial Corp., Deerfield Beach, Florida;
Alan Ray Hunn, General Counsel, Nissan Motor Acceptance
Corporation, Franklin, Tennessee (Headquarters),
Irving, Texas (Operations);
Doug Johnson, Executive Vice President, Chief Legal
Officer, GM Financial, Fort Worth, Texas;
Katherine M. Kjolhede, Executive Vice President & General
Counsel, Ford Motor Credit Company LLC, Dearborn,
Michigan;
Kevin McDonald, Chief Compliance Officer, General Counsel
& Secretary, VW Credit, Inc., Herndon, Virginia;
Catherine M. McEvilly, Compliance Officer, American Honda
Finance Corporation, Torrance, California;
Carol J. Moore, Vice President and Executive General
Counsel, Hyundai Capital America, Irvine, California;
RJ Seaward, Vice President, General Counsel, Harley-
Davidson Financial Services, Chicago, Illinois;
Michelle Spreitzer, General Counsel, Mercedes-Benz
Financial Services, Farmington Hills, Michigan.
The SPEAKER pro tempore. The question is on the motion offered by the
gentlewoman from West Virginia (Mrs. Capito) that the House suspend the
rules and pass the bill, H.R. 5062, as amended.
The question was taken; and (two-thirds being in the affirmative) the
rules were suspended and the bill, as amended, was passed.
The title of the bill was amended so as to read: ``A bill to amend
the Consumer Financial Protection Act of 2010 to specify that privilege
and confidentiality are maintained when information is shared by
certain nondepository covered persons with Federal and State financial
regulators, and for other purposes.''.
A motion to reconsider was laid on the table.
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