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From Banking and Finance Law Daily, January 27, 2015

Use of confidential supervisory information clarified

By John M. Pachkowski, J.D.

The Consumer Financial Protection Bureau has issued a compliance bulletin to remind supervised financial institutions, including nonbank companies that may be unfamiliar with federal supervision, of existing regulatory requirements regarding confidential supervisory information (CSI).

Specifically, Compliance Bulletin 2015-01 provides guidance on what types of information constitute confidential supervisory information. The bulletin also explains that disclosure of confidential supervisory information is not allowed, with limited exceptions. In addition, the bulletin points out that provisions in non-disclosure agreements do not alter or limit the CFPB’s existing supervisory authority or the supervised financial institution’s obligations relating to confidential supervisory information.

CSI defined. After providing the regulatory definition of confidential supervisory information, the bulletin lists a number of examples of CSI. They include, among other things:

  • CFPB examination reports and supervisory letters;

  • all information contained in, derived from, or related to those documents, including an institution’s supervisory Compliance rating;

  • communications between the CFPB and the supervised financial institution related to the CFPB’s examination of the institution or other supervisory activities; and

  • other information created by the CFPB in the exercise of its supervisory authority.

The bulletin also emphasizes that CSI includes any workpapers or other documentation that CFPB examiners have prepared in the course of an examination, as well as supervisory information requests from the CFPB to a supervised financial institution, along with the institution’s responses.

Permissible disclosures. Although the bulletin stresses that supervised financial institutions and other persons in possession of CSI of the CFPB may not disclose such information, it does note that there are certain exceptions to the prohibition.

Under the CFPB’s regulations, a supervised financial institution may disclose CSI of the CFPB lawfully in its possession to:

  • its affiliates;

  • its directors, officers, trustees, members, general partners, or employees, to the extent that the disclosure of such CSI is relevant to the performance of such individuals’ assigned duties;

  • the directors, officers, trustees, members, general partners, or employees of its affiliates, to the extent that the disclosure of such CSI is relevant to the performance of such individuals’ assigned duties; and

  • its certified public accountant, legal counsel, contractor, consultant, or service provider.

No priority for NDAs. Finally, the bulletin cautions supervised financial institutions on using non-disclosure agreements (NDAs) to: restrict the supervised financial institution from sharing certain information with a supervisory agency; and/or require the supervised financial institution to advise the third party when the institution shares with a supervisory agency information subject to the NDA.

The CFPB emphasized that a supervised financial institution should not attempt to use an NDA as the basis for failing to provide information sought pursuant to supervisory authority. The CFPB noted that it has the authority to require supervised financial institutions and certain other persons to provide it with reports and other information to conduct supervisory activities, pursuant to the Dodd-Frank Act; and that failure to provide information required by the CFPB is a violation of law for which the bureau will pursue all available remedies.

Commenting on the bulletin, CFPB Director Richard Cordray said, “The CFPB’s supervision program holds companies accountable for how they treat consumers. The Bureau’s oversight of banks and nonbanks alike helps to level the playing field for all companies, and to ensure a fair and transparent marketplace for consumers.”

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