Geithner: new consumer rules to wait until 2011

WASHINGTON (Reuters) - The new consumer financial protection agency will have limited ability to impose rules on banks and other lenders until the middle of 2011, Treasury Secretary Timothy Geithner said on Wednesday.

It had been unclear when the agency would start drafting rules on mortgages and other credit products that the financial industry fears could severely crimp its profits.

"It is fair to say that until that authority is transferred, which will not happen before July of 2011, and before there is a confirmed director in place this agency by statute has very limited authority to actually write new rules," Geithner said in congressional testimony.

Geithner also said he expected that Elizabeth Warren, whose appointment as a White House adviser on the consumer agency allowed her to bypass a Senate confirmation, would testify before Congress when asked.

Democrats have promoted the new Consumer Financial Protection Bureau created by the Dodd-Frank law as a new cop on the beat that will ensure consumers are not abused by shady business practices or overly complicated financial products.

Rather than nominate a director to head the new bureau, President Obama on September 17 named consumer advocate and liberal favorite Elizabeth Warren as a special adviser whose job will be to oversee the creation of the bureau. She will report both to the president and Geithner.

Geithner said he favors an early nomination for the director of the bureau.

In the meantime, the administration will "try to build a stronger consensus among the major players on how to improve disclosure and do things like that," Geithner said.

Banks have expressed concern that the agency's powers are too sweeping and it could choke off profits through onerous regulations and limits on the kinds of products that can be offered.

(Reporting by Dave Clarke, editing by Leslie Gevirtz)