Banks moved closer to greater confidentiality for information they share with the Consumer Financial Protection Bureau after the U.S. Senate unanimously passed legislation to extend the protection.
Senators backed amending the Federal Deposit Insurance Act to give lenders assurance that providing information to the bureau wouldn’t automatically waive any privileged status. The measure would correct what lawmakers and the bureau agree was an oversight that left the rule -- already in place for other regulators out of the Dodd-Frank Act, which created the agency.
Senators agreed today to pass the bill by unanimous consent after Senator Jim DeMint, a South Carolina Republican who is stepping down next month, removed a procedural block on the measure. The House passed the bill on March 26 with bipartisan support.
The legislation, which now goes to President Barack Obama to be signed into law, should smooth the way for information-sharing between financial firms and the consumer bureau during regular examinations, L. Richard Fischer, a bank lawyer with Morrison & Foerster LLP in Washington, said in an interview.
Banks will still press the bureau to keep confidential the exam information in response to requests under the Freedom of Information Act or state attorneys general, Fischer said. “This legislation deals with the first issue,” he said.
Some lenders supervised by the bureau, which will examine banks with more than $10 billion in assets and some non-bank firms, objected to Jan. 4 guidance issued by the agency that said firms couldn’t withhold privileged information, such as that protected by the traditional attorney-client shield.
That led to worries on the part of banks that passing information to the consumer bureau could be interpreted as a waiver of privilege, and the information could eventually fall into the hands of private lawyers.
DeMint placed a “hold” on the bill, saying in July that he would remove it in return for a vote to repeal all of Dodd-Frank. After November elections that saw Obama win a second term and Democrats expand their Senate majority, DeMint softened his opposition and raised no objection to a procedural move today to advance the measure.
Senator Bob Corker, a Tennessee Republican, had previously opposed the privilege bill as well. He dropped his opposition in July after the inclusion of a measure that would remove the requirement that banks put placards on ATMs to notify customers of fees. Some banks have claimed that people have pried off the signs, and then sued banks for not having them.
The Senate also unanimously passed the ATM bill.