The U.S. Consumer Financial Protection Bureau says it has the right to see information that is protected by the attorney-client privilege or the work product doctrine as it promotes fairness and transparency in mortgages, credit cards, and other consumer products.

Think again, says the American Bar Association—backed by a task force of former general counsel and top financial lawyers who should know.

The ABA sent a comment letter [PDF] to the CFPB earlier this week, objecting to a proposed rule that gives the agency the right to demand that all banks and other supervised financial entities submit privileged information to the bureau during examinations.

In the letter, ABA president William Robinson III expresses “serious concerns” about the “unfounded assertion of the bureau’s authority to compel production of privileged materials.” The rule places supervised companies at risk of losing the privilege if they turn materials over to the bureau, Robinson states.

His comments were prepared in coordination with the ABA Task Force on Financial Markets Regulatory Reform, which includes 15 prominent financial services lawyers and current or former GCs.

Co-chairs of the group are Giovanni Prezioso, the former general counsel of the Securities and Exchange Commission, and now a partner at Cleary Gottlieb Steen & Hamilton; and William Kroener III, former GC of the Federal Deposit Insurance Corp., and now counsel at Sullivan & Cromwell.

Other task force members include John Liftin, GC of the D.E. Shaw group; Simon Lorne, chief legal officer of Millennium Management; Robert Mundheim, former general counsel of U.S. Treasury Department, and now of counsel with Shearman & Sterling; Ernest Patrikis, ex-GC of the Federal Reserve Bank of New York, and now a partner at White & Case in New York; and Richard Whiting, former senior attorney with the Federal Reserve Board in Washington, D.C., and now executive director and general counsel of the Financial Services Roundtable.

The CFPB proposed the rule on March 15 and solicited comments through April 16.

In a press release last month, bureau director Richard Cordray called it “a common sense rule that is consistent with our practice of guarding the confidentiality of the information of the institutions we supervise.” The release also said the Dodd-Frank Act of 2010 gave the agency the authority to issue rules to enable it to fulfill its mission.

But the ABA disagreed, giving the new federal agency an earful. It began with a lecture on the history and importance of attorney-client privilege and the work product doctrine.

And it included a scolding: “The bureau lacks legal authority to compel supervised entities to submit information and materials protected by the attorney-client privilege and the work product doctrine.”

President Barack Obama used a controversial recess appointment to install Cordray, the ex-Ohio attorney general, as the agency’s leader in January. Cordray and the CFPB declined a request for comment on the ABA’s letter.

The letter states that since 2004, the ABA and numerous state and local bar associations have worked closely with a broad coalition of business and legal groups—ranging from the U.S. Chamber of Commerce to the American Civil Liberties Union—to challenge federal agency policies that seek to require or pressure companies to waive their privileges during investigations and other proceedings.

Previously the U.S. Department of Justice, the U.S. Sentencing Commission, and numerous other agencies responded by reversing or substantially modifying their privilege waiver policies, according to the ABA.

Finally, the letter urges the bureau to drop its proposed rule and instead to urge Congress to pass legislation recently approved by the House of Representatives (H.R. 4014) and now pending in the Senate that would preserve the privileged status of materials submitted to the federal agencies.

See also: “Cordray’s Former GC on the CFPB Director’s Past and Future,” CorpCounsel, February 2012; and “Circuit Says Lawyer Waived Privilege When He Gave Material to Feds,” The Recorder, April 2012.