A new House bill would establish a Financial Product Safety Commission.
The commission would try to help consumers get a fair deal on such products as retirement savings accounts, mortgages and credit cards, according to Reps. William Delahunt, D-Mass., and Brad Miller, D-N.C., the lawmakers who introduced the Financial Product Safety Commission Act.
The bill is similar to S. 566, a bill recently introduced in the Senate by Sens. Charles Schumer, D-N.Y., and Richard Durbin, D-Ill.
It appears to be unlikely that insurance products would be covered under the legislation, because a “savings” clause says the McCarran-Ferguson Act “remains the law of the law of the U.S.”
Lawyers at the American Council of Life Insurers, Washington, are still unclear whether the bill applies to insurance, according to ACLI staffer Steven Brostoff.
“We continue to analyze the proposal to determine if it would affect any policies or policy provisions,” Brostoff says.
The National Association of Insurance and Financial Advisors, Falls Church, Va., “is currently studying the scope of the bill,” a NAIFA representative says. “Initially it appears not to cover insurance products. We reserve comment until we have a firm understanding of the full implications of the bill.”
Miller said at a press conference that the Financial Institutions and Consumer Credit Subcommittee of the House Financial Services Committee would likely consider the bill in the next few weeks.
The bill would establish a 5-member independent agency that would have the power to ban abusive or unfair sales practices and financial products.
The agency also could set standards for lenders issuing the products and would have the power to bring civil or criminal action against rule violators.
Miller said the idea of a commission is supported by key members of Congress such as House Financial Services Committee Chairman Barney Frank, D-Mass., and Senate Banking Committee Chairman Christopher Dodd, D-Conn.
Miller and consumer advocates who support the bill say it is unlikely to be passed as a stand-alone measure, but probably would be folded into financial institution regulation reform “omnibus legislation.”
The omnibus legislation, or legislative package, could include provisions that would create a procedure for handling problems at non-bank financial firms whose failure could pose a risk to the economic system.
The Financial Product Safety Commission bill is the brainchild of Elizabeth Warren, who teaches bankruptcy law at Harvard Law School.
Warren is head of the oversight board for the Troubled Asset Relief Program.
Under the Delahunt-Miller bill, the commission would have the authority to:
- Prevent predatory or deceptive financial practices and educate consumers on the responsible use of financial products and services.
- Coordinate enforcement with the other federal and state regulators and with the private sector, to establish minimum consumer financial product safety standards.
- Report regularly to the public regarding the state of consumer financial product safety and recommend the steps that should be taken to improve the value of financial products for consumers.