CFPB proposal ‘a restraint on free speech’
Posted by on October 26, 2016

CFPB seeks to silence investigation targets, drawing fire on free speech

By Lorraine Woellert \ VIEW ONLINE 

The CFPB wants to silence companies under investigation and is seeking greater freedom to share confidential information gathered as a result of those inquiries.

The bureau's proposal, part of a little-noticed update to its rules on records collection, drew unanimous fire from a broad coalition of financial companies, as well as from the American Bar Association and the American Civil Liberties Union, which called it unconstitutional.

The plan would prohibit targets of civil investigative demands or notice and opportunity to respond and advise letters — CIDs and NORA letters — from disclosing the receipt of such notifications. Legal experts called the proposal a restraint on free speech and warned that it could run afoul of laws that require companies to disclose material information to shareholders.

ACLU Legal Director Art Spitzer likened the proposal to National Security Letters, a product of the Patriot Act that give the FBI the power to collect customer records held by banks, telephone companies and internet service providers without a customer's knowledge.

"It's like the National Security Letter gag orders, except the compelling government interest is nowhere near what it is in a national security case," Spitzer said in an interview. "I'm not sure I see any compelling government interest."

On a practical level, the proposed rule would keep investors, shareholders and the public in the dark about federal investigations that might have a material impact on a company's operations. It also would give the bureau freedom to embark on "unwarranted fishing expeditions," said Jeb Hensarling, chairman of the House Financial Services Committee.

"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," Hensarling wrote in a letter.

The bureau also drew criticism for a proposal that would allow it to share privileged information with any "federal, state, or foreign governmental authority, or an entity exercising governmental authority" whenever "it is relevant to the exercise of the agency's statutory or regulatory authority."

That provision could pierce attorney-client privilege, a "bedrock legal principle of our free society", and hobble companies seeking advice on regulatory compliance, said Linda Klein, president of the American Bar Association.

A CFPB spokesman declined to comment.

The proposal is an attempt by the bureau to clarify rules regarding the treatment of confidential investigative information.

Other financial regulators limit public disclosure of confidential information outside of the agency but don't distinguish between supervisory materials and enforcement materials. Current CFPB regulations make both categories confidential.

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