Fed to Conduct Consumer Protection Compliance Exams of Nonbank Subsidiaries
The Federal Reserve announced last week that it would begin examining nonbank subsidiaries of bank holding companies for compliance with consumer protection laws. A September 14 letter from Sandra F. Braunstein, the agency's Director of Consumer and Community Affairs states:
This letter establishes, effective immediately, a policy for conducting risk-focused consumer compliance supervision of, and the investigation of consumer complaints against, nonbank subsidiaries of bank holding companies (BHCs) and foreign banking organizations (FBOs) with activities covered by the consumer protection laws and regulations the Federal Reserve has the authority to enforce. This policy is designed to enhance our understanding of the consumer compliance risk profile of nonbank subsidiaries and to guide our supervisory activities for these entities. It leverages existing consumer compliance supervision policies and procedures as well as the existing prudential supervision processes for Large Complex Banking Organizations (LCBOs), FBOs, Regional Banking Organizations (RBOs), and Community Banking Organizations (CBOs).
The consumer compliance and full-scope examinations of nonbank subsidiaries will result in ratings based on the "Consumer Compliance Risk Management rating system (Strong, Satisfactory, Fair, Marginal, or Unsatisfactory) that is included in the draft Risk-Focused Consumer Compliance Supervision Program," according to the letter.
The Feds announced this move a day after President Obama publicly reiterated his support for a new consumer protection enforcement agency.
