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Professor Pushes for Commission to Help People Identify High-Risk Financial Products

A recent report by "The Dallas Morning" news made note of the issue that many consumers are not being protected from potential financial scams and hazards.

by Staff
July 17, 2007
2 min to read


A recent report by "The Dallas Morning" news made note of the issue that many consumers are not being protected from potential financial scams and hazards.


Harmful products are yanked from shelves in order to keep consumers safe, and foods are recalled when deemed dangerous, but who’s on the look out for consumer’s safety when it comes to credit cards, mortgages and car loans?

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In a recent article for Democracy: A Journal of Ideas, Elizabeth Warren proposes a Financial Product Safety Commission.

Warren, a professor at Harvard Law School and an expert on bankruptcy and consumer-finance issues, is calling for a new regulatory organization to review credit card offers, home mortgages, car loans and many other financial products for consumer safety issues.


“Why are consumers safe when they purchase tangible consumer products with cash, but when they sign up for routine financial products like mortgages and credit cards, they are left at the mercy of their creditors?” Warren wrote.


Warren’s Financial Product Safety Commission would establish guidelines for consumer disclosures, collect and report data about the uses of different financial products, evaluate new products for safety, and require modification of dangerous products before they can be marketed to the public.


Financial services companies already are regulated by organizations such as the Federal Reserve, which sets banks’ reserve requirements, and the Federal Deposit Insurance Corp., which insures bank deposits.

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But according to Warren, the reviewing of actual consumer products is done haphazardly, if at all.


“We in the banking industry have at least four — five or six if you want to include state bank regulators and the Securities and Exchange Commission for various securities products,” says Wayne Abernathy, executive director for regulatory affairs at the American Bankers Association. “These four bank regulators have authorities and resources that are broad and effective ... Adding one more layer would be more than redundant.”


In support of Warren’s ideas, Democratic presidential candidate John Edwards has worked her plan into his platform, helping to tap into the frustrations many Americans feel when dealing with lenders and the credit-reporting industry.


Topics:F&I

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