The Consumer Financial Protection Bureau (CFPB or Bureau) wants to silence companies being investigated by the Bureau and is seeking greater freedom to share confidential information gathered as a result of those inquiries with governmental authorities.
Legal analysts cautioned the CFPB that its proposed rule to silence companies being investigated by the Bureau might potentially infringe on free speech rights. The warnings from the legal community were submitted during the window of public comment for the CFPB’s proposed regulatory change. Of the comments received, the most critical were from American Civil Liberties Union (ACLU) and American Bar Association’s (ABA) Business Law Section who denounced a particular provision within the proposed regulation that would restrict both individuals and companies from publicly divulging confidential information related to CFPB investigations. This information includes civil investigative demands (CIDs) or notice and opportunity to respond and advise letters (NORAs).
The proposed provision of the regulation would restrict companies from discussing information connected to any Bureau investigation, including the existence of an investigation itself. Representatives from the legal community noted that other federal agencies like the Securities and Exchange Commission (SEC) had not established any similar prohibitions on companies under their scope of regulation or other entities with knowledge of ongoing investigations.
William Johnston, chairman of the ABA’s Business Law Section, emphasized that First Amendment legal precedent historically protects public discussion of government action and that courts operate on the presumption that government attempts to restrict this class of speech violate the constitution. Additionally, Arthur B. Spitzer, legal director of the ACLU, commented that companies under CFPB investigation might have a compelling fiduciary or moral reason to share such information with certain outside entities, including current and future investors.
The chairman of the House Financial Services Committee, Jeb Hensarling, also criticized the Bureau in a letter saying, “Because of the potential for government abuse and First Amendment due process implications, Congress has typically limited such arrangements to investigations with national security implications.”
While the CFPB responded that they take concerns seriously, it is unclear how the critique will change the current direction of the Bureau. The proposed rules would prevent companies from discussing wide-ranging issues about ongoing investigations. Moreover, any information formally requested to be shared with unrelated third parties would have to be approved by senior CFPB executives.
The majority of the public comments received by the CFPB also addressed a provision that authorized the Bureau to share confidential and privileged information of a company with both U.S. and foreign government authorities. Trade group representatives contend that the provision exceeded the limits of the CFPB’s Congressionally-granted authority. Linda Klein, president of the American Bar Association, said that the provision could have a profoundly adverse effect on the attorney-client privilege of companies seeking legal advice for their regulatory issues.
The criticism of the CFPB comes at a time when the authority of the Bureau has come under direct fire. In early October 2016, a federal appellate court held that the Bureau’s internal organization framework, which granted its director with an unprecedented degree of independence, was unconstitutional because the President was not allowed the authority to remove him from his position. According to legal experts, the CFPB plans to appeal the decision amidst continuing criticism from the financial sector and members of Congress.
The proposed regulatory framework is an attempt by the Bureau to clarify rules regarding the treatment of confidential investigative information.
