Analysis: Consumer chief delay could hobble new agency

WASHINGTON (Reuters) - Prospects are dimming that a new U.S. consumer agency head will be in place this year, prompting fears that what was envisioned by supporters as a powerful watchdog could get off to a rocky start.

A dwindling legislative calendar and Republican momentum going into the November elections could lead to a protracted confirmation process, especially if the White House nominates Harvard law professor Elizabeth Warren, who Wall Street has blasted for her attacks on banking practices.

President Barack Obama is expected to announce as soon as this week his nominee to lead the agency, a position which requires Senate confirmation.

Consumer advocates, labor unions and other supporters of the agency are concerned that a months-long delay will be a setback in establishing the authority of the Consumer Financial Protection Bureau over consumer lending practices, including mortgages and credit cards.

“From our point of view, a delay into next year in appointing leadership would be a serious problem,” said Travis Plunkett, legislative director of the Consumer Federation of America. “It would call the need for the agency into question.”

Supporters of the agency say a leaderless agency will have a tough time attracting top talent, setting its agenda, and establishing itself as a regulatory force as the government moves quickly to implement the financial regulatory overhaul law enacted in July.

“We really need to get a running start on protecting people from the big banks and Wall Street,” said Stephen Lerner of the Service Employees International Union.

But a delay is a problem advocates will likely have to face and opponents of the bureau say its supporters’ concerns are valid.

“I just think the agency is going to get off to very sluggish start, which doesn’t pain me particularly, I’m not a fan of that thing,” said Bert Ely, a banking consultant in Alexandria, Virginia.

In the meantime, work has begun to put the agency together.

Under the law, Treasury is charged with getting the bureau up and running until a director is confirmed. A senior Treasury official said that work on all areas related to the bureau, from policy issues, to nuts and bolts bureaucratic decisions, have begun in earnest.

“There is no constraint at all to us pushing ahead on bureau start-up and consumer protection initiatives in the absence of a director,” the official said.

While Warren may be a hero to many liberals and consumer groups, she has few fans among Republicans or in the banking world. But any nominee will almost certainly need 60 votes to get confirmed by the 100-seat Senate due to Republican opposition to the bureau itself and the need for a supermajority to overcome procedural hurdles.

In addition, Congress, currently led by Democrats, is only expected to be in session for about a month starting September 13 before members head home for the November elections.

That leaves little time for the nominee to go through the regular vetting process by the banking committee and then receive a vote by the full Senate, especially if delaying tactics are employed, according to congressional aides.

A post election lame-duck session will also be a difficult time to get the process completed.

That would leave the bureau without a leader entering the new year.

Alternatively, Obama could use his ability to bypass the Senate and appoint a director before the end of the year when the Senate is in recess.

But a recess appointee could only serve for about a year, under congressional rules, instead of a full five-year term.

The bureau has broad authority to regulate a variety of consumer financial products and banks and other financial sector players are concerned it will impose rules limiting fees and penalty charges while also making regulatory compliance costs shoot upward.

Among bureau boosters, concerns are that a leaderless agency may have to put off making decisions about what areas of consumer finance -- such as mortgages, payday lenders and overdraft issues -- it should focus on first when drafting new rules.

In addition, there is a question of whether a delay in having a leader in place will make it difficult to attract talent for top jobs that will be critical to getting the agency up and running, including the deputy director and those focusing on collecting consumer complaints, unfair lending practices, senior citizens and financial literacy.

“They’re going to want to know who they are working for,” Plunkett said.

Reporting by Dave Clarke; Editing by Karey Wutkowski and Tim Dobbyn