WASHINGTON (Reuters) - The Federal Reserve said on Tuesday it was immediately launching a new consumer compliance supervision program for mortgage companies and other non-bank subsidiaries of the firms it regulates.
The Fed said the new policy will allow investigations of consumer complaints against non-depository entities of bank holding companies and foreign banking firms and will be implemented under existing regulatory authorities.
The move comes as the Obama administration is pressing Congress to pass legislation that would strip consumer compliance duties from the Fed and other bank regulators and consolidate it at a new agency, the Consumer Financial Protection Agency.
The Fed has come under intense criticism among lawmakers and housing advocates for failing to use its legal authority for years to write tougher rules on mortgage underwriting standards and credit cards, which some blame for deepening the financial crisis.
Fed Chairman Ben Bernanke has in recent months put in place tougher rules, but these steps may not be enough to save these functions at the U.S. central bank. The Obama administration hopes to win approval of the new consumer agency by year-end, along with other financial reforms.
The Fed said in a statement that the new compliance program stems from a 2007 pilot program launched with the Federal Trade Commission, the Office of Thrift Supervision and two associations of state regulators to conduct consumer compliance reviews on non-depository subprime mortgage lenders.
“The policy announced today builds upon the groundwork of the pilot program and responds to a need for more effective supervision and consumer protection,” the Fed said. “It is designed to improve the Federal Reserve’s understanding of the consumer compliance risk that certain products and services may pose to the holding companies and consumers and to guide supervisory activity for these entities.”
Reporting by David Lawder; Editing by Andrea Ricci