WASHINGTON — House Republicans threatened Thursday to roll back the scope and authority of the new Consumer Financial Protection Bureau even before it officially opens for business next week.
At a combative hearing before the House Committee on Oversight and Government Reform, Republicans squared off against Elizabeth Warren, who is setting up the new agency, challenging her to explain what they saw as a bloated, $500 million budget, an overly broad mandate and regulatory power that could deter lending.
As Democrats rallied to defend Ms. Warren and the start-up agency, the morning-long hearing underscored the fundamental disagreements between Republicans and Democrats over the mission and powers of the bureau, echoing the fight over its creation last year.
The agency, created by Congress in the sweeping Dodd-Frank financial regulations law to guard borrowers from unfair lending practices, formally starts operations next Tuesday after nine months of preparations.
Ms. Warren, a Harvard law professor, has been leading the organization of the bureau but many Republicans have opposed her as the full-time director because they believe she has a history of antibusiness attitudes. The White House has not announced a nominee for director, who would require Senate confirmation.
This was Ms. Warren’s second appearance before the oversight committee since May, when she and Republicans clashed openly when she attempted to excuse herself after an hour of testimony.
Both Republicans and Democrats promised more civil discourse in Thursday’s hearing. But the political sniping sometimes overwhelmed testimony as the hearing devolved into what one committee member called “a partisan food fight.” Democrats apologized to Ms. Warren for her treatment by Republicans whom they accused of “sabotaging” the agency to protect Wall Street.
Republican members opposed to the agency’s powers repeatedly asked Ms. Warren if there were credit instruments or practices, like payday lending, that she would seek to ban as abusive or unfair under the agency’s new authority.
Ms. Warren said there were not any practices she would want to ban at the moment, adding that she would instead pursue less severe remedies like consumer education, enforcement investigations, fines or civil lawsuits against lenders.
Several Republicans seized on her answer and then pressed her to agree to strip the agency of its power to ban such practices if she did not see any immediate need to use them. But Ms. Warren balked, saying the power to ban practices was one important tool the new agency needed to fix “a broken consumer credit system.”
Expanding on her vision for the agency, Ms. Warren said she saw it as a “cop on the beat” that would regulate lending institutions, seek to simplify loan documents to make them more understandable and guard against fraud and abuse.
Republicans have unsuccessfully tried to chip away at the authority and structure of the agency by proposing a commission instead of a single director to oversee it, among other ideas. They signaled Thursday that they want to reduce the agency’s powers by challenging the salaries of some staff members, the justification for its budget decisions, its authority to look into certain types of financial institutions and practices, and a number of other organizational issues.
Representative Ann Marie Buerkle, Republican of New York, said she worried that an overly intrusive consumer agency would drive up the cost of compliance by lenders and make it harder for small businesses and others to get affordable credit.
Ms. Warren said that the large banks and lenders hired “armies of lawyers” who produced loan documents that were indecipherable to many Americans. “We need some pushback. We’re the voice on behalf of the customers, the American families,” she said.
She said that the agency’s regulation of the industry should help to lower the costs of credit to Americans, rather than raise it, and make borrowers “a little more secure.”
Representative John F. Tierney, Democrat of Massachusetts, said he found it “stunning” that Republicans appeared to be “flacking for banks” rather for standing up for borrowers and for an agency meant to protect them.
Democrats won a small victory when they sought to get Representative Darrell E. Issa, the California Republican who leads the committee, to subpoena major mortgage lenders for documents on abusive practices.
Mr. Issa refused the demand for subpoenas, but he agreed later in the day to a compromise of sending a formal “document request,” along with Representative Elijah E. Cummings of Maryland, the ranking Democrat on the panel, to seek records from 10 major lenders related to lending abuses involving service members.
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