Calling government claims about the value of legal settlements with financial firms “misleading,” two lawmakers on Wednesday introduced legislation to require public disclosure of more information on the terms of these agreements.

    Sen. Elizabeth Warren (D., Mass.) and Sen. Tom Coburn (R., Okla.) said tax deductions and other terms often make settlements less significant than officials typically tout.

    Their legislation – dubbed the  “Truth in Settlements Act” — would require copies of settlements above $1 million to be posted on federal agency websites – something agencies typically do already. Any written statements by the government mentioning the dollar value of these settlements would have to include how they are categorized for tax purposes and whether they could be offset with credits for good conduct.

    Concern about settlements arose last fall when J.P. Morgan Chase & Co. reached a $13 billion settlement with the government over soured mortgage securities the bank sold before the financial crisis. Much of that settlement was tax-deductible, meaning J.P. Morgan could effectively pay billions of dollars less than $13 billion.

    However, a separate $1.7 billion settlement announced this week over J.P. Morgan’s liability in Bernard Madoff’s fraud scheme is not tax deductible. As part of its settlement agreement with the Justice Department, J.P. Morgan agreed that it wouldn’t deduct its $1.7 billion payment.

    “When government agencies reach settlements with companies that break the law, they should disclose the terms of the deal to the public,” said Ms. Warren, who has been pushing regulators to be more aggressive in pursuing legal cases against financial firms.

    In addition to the Warren-Coburn bill, bills are pending in both the Senate and the House of Representatives that would restrict or eliminate the deductibility of settlement payments.

    The lawmakers also said they were concerned about mortgage industry settlements that allow mortgage companies to take credit for borrower assistance that they may have undertaken regardless of the settlement.

    The Warren-Coburn legislation would require companies to say in their Securities and Exchange Commission filings whether they have deducted settlement payments from their taxes. Federal agencies would also be required to report statistics on any confidential settlements, and explain why they deemed it justified for the settlement to be confidential.