George Osborne, the Tory shadow chancellor, caused a furore last week with his plan to abolish the Financial Services Authority. Less highlighted was his parallel scheme to bring the retail financial oversight of the FSA and the Office of Fair Trading into a new Consumer Protection Agency.

That will not hit the British public for several years. Assuming, as is likely, that Osborne moves into 11 Downing Street next spring, it will take a few years to go through the legislative process and then form the proposed new body.

But a glimpse into the future is already available on the other side of the Atlantic. And it is very worrying indeed.

President Obama is backing a planned Consumer Financial Protection Agency Act which might get through Congress by the end of this year, economic crisis and the interminable US healthcare debate permitting.

The US version of the agency will naturally have authority to regulate mortgages, credit cards and saving and borrowing products to ensure consumers “have, undersand and can use the information they need to make responsible decisions.”

So far so good, and very much a mirror image of the FSA’s current commitment to financial education.

But the US agency will be more pro-active than that. As it stands, it will have the right to design standard consumer financial products that companies will have to offer alongside their own competing products.

It doesn’t stop there. The new body will have the power to stop a settler marketing its own product if that is deemed to “cause substantial injury to consumers… not outweighed by countervailing benefits to consumers or to competition.”

Elizabeth Warren, the Harvard law professor earmarked to become the US consumer agency’s first chairman, says the descriptions of the benchmark products will be designed “to be read in less than three minutes.”

That is a tall order for all but the simplest financial accounts or policies. The danger is that it will force the agency to over-simplify, and the easiest way to do that is to ban those products with which it disagrees, using the “substantial injury” clause.

Richard Posner, a US federal circuit judge and a lecturer at Chicago University Law School, warned: “The agency might outlaw prepayment penalties on mortgages. They do make refinancing more costly, but mortgages that include such penalties compensate by charging a lower interest rate. Is the choice among such alternatives really beyond the cognitive competence of the average home buyer?”

This touches on a fundamental problem in managing imperfect financial capability in any country with sophisticated products that consumers might not fully understand. How much of a nanny should government agencies be?

I am pleased to see Gordon Brown beginning to apply the resources and serious thought to financial education that I have been advocating for the past decade. But, as everyone acknowledges, that is an unavoidably long process that carries the immense difficulty of educating those who have already left school and may be bored to tears at the very sight of a pound sign. So it becomes extremely tempting for official bodies to step in and say “Do this, don’t do that and don’t ask questions – it’s all for your own good!”

For, apart from the most blatant rip-offs, there are pros and cons to every financial product. Fixed versus adjustable-rate mortgages is a classic example of a debate with no easy answers. And I am no fan of structured products that use derivatives markets to conjure up a superficially attractive guaranteed return. But, at a price, they do give investors a degree of certainty – and if they want to pay for that with their eyes open, should any government agency tell them they can’t?

If Osborne’s consumer protection agency gets off the ground, I just hope that it will not try to play God. Headmaster will be quite enough of a role, thank you very much.