Delahunt plan would protect consumers from bad financial products

Jon Chesto

U.S. Rep. Bill Delahunt plans to file a bill next week that would create a new federal agency aimed at ensuring the safety of financial products for consumers.

Delahunt said the proposed agency, the Financial Product Safety Commission, would deal with debt-related products, ranging from credit cards to mortgages.

The Quincy Democrat revealed plans on Tuesday to file the bill with U.S. Rep. Brad Miller of North Carolina next week. The bill will mirror a similar measure filed this week in the Senate by Assistant Senate Majority Leader Dick Durbin of Illinois and Sen. Chuck Schumer of New York, two Democrats who share a house in Washington with Delahunt.

Delahunt said that the new commission could help address some of the problems that consumers are still seeing in the mortgage and credit card markets, as well as head off future problems.

“What we’re trying to do, in terms of financial products, we’re trying to end the concept of caveat emptor, ‘buyer beware,’” Delahunt said. “This watchdog would be (created) to ensure that the financial products that are issued are safe.”

He said such a commission could have helped to prevent the proliferation of subprime mortgages that has led to a wave of foreclosures and sent shock waves throughout the economy.

“We have learned to our dismay that this doesn’t just impact the individual consumer, but affects the entire financial system and is contagious to the point we have a global financial crisis on our hands,” Delahunt said.

Delahunt said the idea for the commission came from Elizabeth Warren, a Harvard Law School professor who has testified on foreclosure issues in congressional forums at Delahunt’s request. Warren is also the chairwoman of a panel overseeing the disbursement of money from the $700 billion federal Troubled Asset Relief Program.

Delahunt said he hopes the proposed commission could play a role that’s similar to the one played by the Consumer Product Safety Commission, which regulates the safety of thousands of consumer products such as toys and appliances.

Delahunt’s bill will likely face resistance from some sectors of the financial services industry that would view this agency as a burdensome extra layer of government bureaucracy. The agency, among other things, would try to educate consumers on the responsible use of certain financial products and coordinate enforcement actions with state and federal regulators.

Jon Chesto may be reached