Thursday, December 11, 2008

Push to Establish Financial Product Safety Commission

The Consumer Federation of America has announced that it, along with its allies, intends to push for the creation of an agency, similar to the Consumer Product Safety Commission, to regulate financial services products. This proposed Financial Product Safety Commission would regulate the offerings of financial and credit products, currently regulated by a complicated set of state and federal laws and agencies, like home mortgages, credit cards, and car and other consumer loans.

Chief among the proposed agency’s proponents is Elizabeth Warren, a law professor at Harvard University, recently named as head of the Congressional Oversight Panel, the five-member board overseeing the Troubled Asset Relief Program. Warren announced recently in an address before the Consumer Federation of America that she strongly supports the agency, and that she would continue to advocate for its creation. Warren has some powerful allies in Congress. Senate Majority Whip Dick Durbin (D-Ill.) introduced legislation that would create such an agency, and Senator Christopher Dodd (D-Conn), chairman of the Senate Banking Committee, will likely be receptive to the idea of a Financial Product Safety Commission, given his promise to support legislation designed to reign in what Warren and others have characterized as abusive and unfair practices of credit card companies.

What such an agency would mean to the investor protection efforts of FINRA and the Securities and Exchange Commission is uncertain. It is certain, however, that a Financial Product Safety Commission would be opposed by an array of powerful interests, including banks, credit card companies, insurance companies, and providers of mortgage products.