Those operating in the financial services space have long had problems with the Consumer Financial Protection Bureau (CFPB), a creation of the flawed 2010 Dodd-Frank financial overhaul bill and the brainchild of financial sector foe Sen. Elizabeth Warren (D-Mass).
But now, those tangling with the CFPB could face a fresh headache: The agency, whose constitutionality is currently being challenged, is pursuing a rule that would effectively kill the concept of attorney-client privilege by permitting the CFPB to share information between regulated entities and their lawyers with other regulators, foreign and domestic.
The rule is drafted in such a way that it kills Congress’ ability to oversee any such information-sharing, and blocks regulated entities from disclosing any communication with the CFPB unless the CFPB approves.
In other words, it erodes a fundamental, constitutionally-protected civil liberty and throws up major roadblocks to anyone holding the CFPB accountable, in one fell swoop.
The American Bar Association opposes the proposed rule, offering this explanation: “Each such disclosure of privileged information by the CFPB to a non-federal agency or Congress could endanger the privileged status of the information.”
In plain English, that means that every time the CFPB shares privileged information, they’re nixing its confidentiality. As a matter of federal legal precedent, you can’t share privileged communication with a third party without its confidentiality disappearing (there are a few narrow exceptions, which are at odds with what the CFPB is proposing).
If the CFPB gets its way, you will have the right to an attorney, but what you and your attorney say to each other won’t be private and it can be used against you, whether in a court of law or in regulatory proceedings. And this matters greatly, as a matter of constitutionally-protected civil liberties because, as the ABA puts it, attorney-client privilege is essential for protecting “fundamental rights to effective counsel.”
Those rights are protected by the Sixth Amendment to the U.S. Constitution, which reads:
“In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the State and district wherein the crime shall have been committed, which district shall have been previously ascertained by law, and to be informed of the nature and cause of the accusation; to be confronted with the witnesses against him; to have compulsory process for obtaining witnesses in his favor, and to have the Assistance of Counsel for his defense.”
Clearly, the civil liberties immediately at risk here are those of financial service providers themselves — not you or me, unless, you own an entity the CFPB regulates or is trying to regulate. The problem — which has always been the case — is that when you start eroding a right for one arguably undesirable person, you tend to end up eroding it for all people. Once you set a legal precedent, it has a tendency to stick around and be invoked in instances in which the people who conjured it up never predicted. Don’t believe that? Just ask President Barack Obama, whose expansion of executive authority is now being used to undo his signature health-care law.
Given this, the ABA wants the CFPB to go back to the drawing board. House Republicans want the CFPB to “provide the Committee with the statutory authority on which the Bureau relies … and please further indicate what legal safeguards exist to prevent the Bureau from abusing the power it proposes to grant itself in this proposal.”
That’s all well and good, but even if the CFPB had the authority to write this rule, and had safeguards in place, it would not change the fact that fiddling around with attorney-client privilege is a bad idea that sets a very bad precedent well beyond the realm of financial services regulation. And, as such, it is also one that has major implications for civil liberties more broadly. At a time when many Americans are concerned about the ongoing erosion of exactly those freedoms in a variety of areas, it would be better if the CFPB parked its pursuit of this rule altogether, even if it does hamper their ability to go after what it perceives as nefarious Wall Streeters.