Just about all to feel financial reform changes

But soon, retailers like Kabbenjian could get relief from what they consider onerous fees. The requirement to charge “reasonable” debit or credit card fees is just one small part of what has been called the most sweeping financial reform in a generation.

The proposed law, which lawmakers are hoping to soon send to President Barack Obama for his signature, aims to avoid a repeat of the financial meltdown of 2008 by retooling federal regulatory agencies, taming some of Wall Street’s most exotic financial products and requiring banks to reserve more money for unexpected losses.

But the massive reform bill — still being tweaked following a compromise reached in a marathon negotiating session between Senate and House lawmakers late last month — contains many other changes that would touch just about everyone. They range from tighter rules on mortgage lenders — a move Georgia’s lawmakers blocked earlier this year — to the creation of a new federal watchdog unit, the Consumer Financial Protection Bureau.

Consumers will get a complaint hotline to the new bureau, which will oversee financial matters like the federal truth-in-lending law, credit card accounts and payday lenders. They also will get free access to credit scores and a permanent increase in federal deposit insurance to $250,000 on bank and credit union accounts.

Metro Atlanta neighborhoods and jobless homeowners threatened by foreclosures also could get a helping hand. The bill earmarks $1 billion each for emergency aid on mortgage payments and for neighborhood stabilization programs.

“It would make a dent,” said John O’Callaghan, president of Atlanta Neighborhood Development Partnership. He estimates local neighborhood stabilization programs like his would get a total of $24 million under the bill, enough to fix up and sell as much as $100 million worth of foreclosed homes in metro Atlanta. “That’s very significant,” he said.

Not everyone is happy about the proposed bill. Many players in the financial industry have continued to fight the bill’s proposals, winning a battle recently when Democratic lawmakers ditched plans for an $18 billion tax on banks and hedge funds to pay for the bill.

Reform advocates, meanwhile, say the bill doesn’t go far enough to reduce the risk posed by the largest financial corporations.

“There was a lot of nibbling at the edges of this bill” and it’s still not signed into law, said Danny Orrock, deputy director of consumer advocacy group Georgia Watch. Even if it becomes law, its ultimate impact won’t be clear until its provisions are translated into regulatory rules, he said.

Many of the recent changes opponents won “shift the fight to the federal rule-making process,” he said. “The war is not over.”

Georgia’s bankers still oppose the proposed law. They worry that the planned Consumer Financial Protection Bureau will upend the current federal rules for the truth-in-lending law and other federal regulations, and make it difficult for banks to offer anything beyond plain vanilla financial products.

“Our view is that you’ll see a total stop on financial innovation,” said Joe Brannen, president of the Georgia Bankers Association.

He said more restrictions could cut into banks’ revenues, forcing them to compensate by raising fees on other services or charging for services that are often free, such as checking accounts.

Another change that has bankers in a dither is the proposal regarding so-called “swipe fees” that banks charge merchants to process customers’ debit card transactions.

Typically, the fees average about 2 percent of each transaction, and produce “thousands or hundreds of thousands” of dollars of revenue for the typical community bank, Brannen said.

Those revenues could be cut in half under the financial reform bill, which requires banks’ fees to be based on the cost of the service.

“This is a total abomination. It is just throwing a bone to the big box retailers,” Brannen said. “It has nothing to do with financial reform.”

But such a break on card fees would thrill Kabbenjian, who figures he pays his bank about $15,000 a year to handle debit and credit card sales.

“It’s just mind-boggling, but we cannot do business without credit cards,” he said.

Here's a rundown of some of the planned changes expected to come with the financial reform bill expected to pass Congress:

New consumer watchdog: The Consumer Financial Protection Bureau will have authority over large banks (over $10 billion in assets), mortgage lenders and servicers, payday lenders, consumer reporting agencies and other firms. It sets up a national complaint hotline and affects things like credit card accounts, consumer loans, checking accounts and mortgages, but leaves out auto dealers and other nonfinancial businesses that sometimes offer credit.

New mortgage rules: The proposed law tightens regulation of mortgage lenders, requiring lenders to document borrowers' ability to repay loans. It also prohibits pre-payment penalties that trapped some borrowers in subprime loans and bans mortgage lenders from paying bonuses such as "yield spread premiums" that rewarded mortgage brokers for steering customers to higher-cost loans.

The federal bill accomplishes what advocates had been trying unsuccessfully for two years to get written into law in Georgia, said Danny Orrock, deputy director of consumer advocacy group Georgia Watch.

Stabilizing big banks and firms: The bill limits the amount of trading that banks over $10 billion in assets can do with their own money — called proprietary trading — or how much they can invest in hedge funds and private equity. The bill also requires banks to set aside more capital for increased size and complexity, and to create separately funded units for parts of their derivatives business. Derivatives are securities such as stock options and interest-rate swaps whose values are based on another financial indicator such as a stock price or interest rate.

SunTrust Banks, with about $172 billion in assets, would be subject to such limits. But like other regional banks, it has relatively limited proprietary trading and derivatives operations.

“We’re watching this very closely but will decline to comment at this time,” said SunTrust spokesman Mike McCoy.

Neighborhood stabilization: Provides $1 billion to state and local programs aimed at fixing up foreclosed homes in hard-hit communities. Another $1 billion would go to help unemployed people keep up with mortgage payments. Such funds could particularly help metro Atlanta, which has been hit by foreclosures and job losses more than most cities. The bill also provides legal assistance to help low- and moderate-income homeowners avoid foreclosure.

Municipal advisers: Advisers who have sometimes been implicated for steering city governments into costly and risky bond or interest-rate swap deals will now be subject to regulation and enforcement by the federal Securities and Exchange Commission. Swap dealers must have a "reasonable basis" to believe their municipal government counterparties have independent advisers.

Such advisers often have a conflict of interest, said municipal bond attorney Earle R. Taylor III, with McKenna Long & Aldridge in Atlanta. Such regulation probably also will restrict advisers’ political contributions to municipal officials, he said.

Shareholder rights: The proposed law requires companies to give shareholders nonbinding votes on executive pay, and requires companies to "claw back" pay that was based on inaccurate financial statements. It also gives the SEC authority to allow investors to nominate candidates for the board of directors.

Investor rights: It requires securities brokers and municipal advisers to have a "fiduciary duty" to clients similar to that of investment advisers and managers of trusts and pensions. Such a rule will "fundamentally change the relationship between the client and the broker," Taylor said.

Deposit insurance: The FDIC's deposit insurance is permanently boosted to $250,000 per qualified account.

Debit and credit card purchases: Retailers can offer a discount for cash purchases and set a minimum purchase of up to $10 for debit or credit card purchases. Credit card companies can only charge merchants "reasonable" fees for processing credit and debit card purchases.

Credit score: Consumers can demand a free look at their credit score if it caused them to be hurt in a financial transaction, such as denied a loan or lease, charged higher fees or interest, or denied a job.