WASHINGTON, Jan 24 (Reuters) - The new Consumer Financial Protection Bureau plans to determine whether lending practices are "abusive" on a case by case basis and the bar for meeting the standard will likely be high, the new head of the agency told a congressional panel on Tuesday.

The 2010 Dodd-Frank financial oversight law gives the bureau the authority to crack down on "abusive" lending practices on top of those that are "unfair" or "deceptive," terms that have a long history in the regulatory world.

The abusive standard, however, is new.

Banks along with Republican lawmakers have said the term is not well defined by the law, leaving lenders concerned the agency could interpret it broadly to curb products it does not like.

Richard Cordray, the director of CFPB, said the term is a bit of a "puzzle" to the agency but he sought to assure lawmakers it was not a weapon he intended to wield often.

"For something to be an abusive practice it would have to be a pretty outrageous practice," he told a House Oversight and Government Reform subcommittee.

Cordray said that as of now his agency did not plan to write a rule defining the term beyond what it says in the law.

He reads the law to mean that it would mostly apply in a circumstances where a consumer only had one option for a financial product and a company used that leverage to gouge its customer.

Republicans told Cordray they are concerned that lenders may be hesitant to offer products that consumers may want because of uncertainty of whether the agency would consider it abusive.

Cordray said his agency would be as clear as it could about how it views the term as it studies the issue.

The bureau was created by the 2010 Dodd-Frank financial oversight law to police financial products like mortgages and credit cards.

Consumer groups have heralded its creation while the business community has warned an overzealous regulator could hurt the economy by making it harder to get loans.

CORDIAL TOWARD CORDRAY

Tuesday marked Cordray's first appearance before Congress since President Barrack Obama made the controversial move earlier this month of appointing him to be director of CFPB without a Senate vote.

Senate Republicans had been blocking a vote on his nomination as they sought changes to the structure of the new agency.

Republicans say the recess appointment of Cordray may be illegal because they contend the Senate was not actually in recess when it was made.

The move is expected to be challenged in court but it remains unclear who will file a suit.

Republicans have pressed the point that any actions taken by the agency under Cordray could be voided if his appointment is found too be illegal.

House Oversight Committee Chairman Darrell Issa asked Cordray if he is taking any steps to guard against such a possibility, such as by recusing himself from certain decisions.

Cordray said he is operating as if he has the full legal authority to do his job.

Republicans made clear they have big worries about the bureau but the banter was more jocular than tense.

When New Hampshire Republican Frank Guinta asked Cordray if his agency would adhere to the hiring freeze Obama has placed on other agencies, the new director responded: "If we were to adhere to the president's hiring freeze we would still be at zero people."

Guinta joked that would be fine with him.

(Reporting by Dave Clarke)

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