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UPDATE 1-U.S. House to move to protect bank information
February 8, 2012 / 9:35 PM / in 6 years

UPDATE 1-U.S. House to move to protect bank information

* House Republicans plan to move legislation soon

* Banks say Dodd-Frank does not protect sensitive info

* Some Democrats support legislative change

By Dave Clarke

WASHINGTON, Feb 8 (Reuters) - Despite the heated partisan rhetoric that surrounds the new U.S. Consumer Financial Protection Bureau, Democrats and Republicans appear to have found at least one change they agree should be made to the agency.

Next week the House Financial Services Committee will consider legislation that would make it more difficult for consumer advocates or other groups to obtain sensitive information that banks share with the bureau.

At a hearing on Wednesday both Republicans and Democrats voiced support for the proposal.

“I support the goal of this bill,” Carolyn Maloney, a senior Democrat on the House Financial Services Committee, said at the hearing, which examined several issues related to the bureau.

Maloney added there are some technical tweaks she would like to see made to the legislation.

The committee announced later on Wednesday that it plans to vote on the legislation on Feb. 16.

The bureau was created by the 2010 Dodd-Frank financial law to police financial products like mortgages and credit cards.

Consumer groups have heralded its creation, while the business community has warned an overzealous regulator could hurt the economy by making it harder to get loans.

Banks have said an oversight by Congress when writing Dodd-Frank meant some confidential information that institutions share with the bureau could be made public through legal challenges.

Bank executives have said this lack of protection raises the threat of lawsuits and could make banks reluctant to share some information with the new bureau.

The issue is how information considered to be protected by the attorney-client privilege is handled. Under most circumstances when this information is shared with a third party, the privilege is waived and it is fair game for others to pursue through the courts.

Such information could be work a law firm has done to determine if a bank is meeting legal requirements to provide services to poor communities. Banks are worried that outside groups could use such information to launch lawsuits if they can use the courts to pry it out of the new bureau.

In the past, Congress has passed laws that keep the attorney-client privilege intact if the third party receiving the information is a bank regulator.

“In the past, Congress has wisely acted to lay to rest the threat of wasteful litigation challenging the protections that should be accorded to information shared by a bank with its supervisor,” American Bankers Association Chief Operating Officer Michael Hunter told Wednesday’s hearing.

CFPB has said it believes such information can be protected under current law, but bureau director, Richard Cordray, told Congress last month that he has no objections to the law being changed to treat the bureau like other banking regulators.

Partisan tensions over the bureau heated up last month when President Barack Obama used a controversial procedural move to install Cordray as the first director of the bureau without a vote by the U.S. Senate.

Republicans have been blocking a vote on Cordray’s nomination until changes are made to its structure they argue would make it more accountable to Congress.

Democrats say a five-member board and a budget approved by Congress would take away the new watchdog’s bite.

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