It may be quite a while before consumers feel the effects of the
newly passed federal financial reform legislation.

Once President
Barack Obama signs it into law this week, federal bureaucrats will need
months to write detailed rules and restructure the alphabet soup of
regulatory agencies to implement the financial overhaul, and some of the
changes won’t take effect until 2012 or later.

"There is a lot of
analysis going on out there," said Ed Novak, spokesman for the state
Department of Banking. "It is going to be really hard to say this is how
it is going to affect consumers right now. There is a lot of stuff that
is dependent on rules that have yet to be written by people who have
yet to be hired."

A few things are fairly certain. Consumers can
expect clearer documentation on short-term loans, mortgages and other
financial instruments and by 2012 there will be a watchdog agency within
the Federal Reserve dedicated to protecting consumers from unscrupulous
practices in the financial industry.

"Currently, if you feel your
bank is ripping you off, no one has any idea where to turn," said
Carmen Balber, Washington director of Consumer Watchdog.

The new
agency, he said, will be able to collect complaints and address their
cause: "People will be spurring … broader reform."

But some in the
banking industry say the new legislation will restrict consumers’
choices by limiting the types of financial instruments they can offer.

There’s
no doubt it will change the way people relate to their banks, said
Robert Lawless, a University of Illinois law professor whose expertise
is consumer credit and bankruptcy.

Community banks with assets
under $10 billion won’t be directly regulated by the new consumer
protection agency, and should be better able to compete with major
banking institutions, said David R. Hunsicker, president and CEO of New
Tripoli Bank.

Big banks will pay a larger portion of Federal
Deposit Insurance Corp. fees. That will reduce premiums paid by the
community banks, he said, allowing them to offer customers better
interest rates. FDIC deposit insurance was increased to $250,000 from
$100,000 at the height of the 2008 banking crisis, and the financial
reforms make that increase permanent.

A change to the rules
governing so-called interchange fees charged by banks on debit card
transactions, for example, could encourage merchants to offer discounts
to customers who pay cash. The fees will also be capped.

What that
means for consumers is that smaller retailers may not need to place
limits on debit card transactions or may be able to lower costs of
goods.

The legislation also allows interest-bearing business
checking accounts, he said, lifting a previous ban.

Less
noticeable to consumers will be restrictions the new law places on
derivatives, the risky investments that contributed to the economic
collapse.

Lawless would prefer additional limits.

"The
bill reduces some of the incentives to engage in this behavior," he
said, "but it doesn’t get rid of it."

While the legislation may
improve confidence in the financial markets, it won’t prevent the next
financial crisis, said Scheherazade S. Rehman, professor of
international business finance and international affairs at George
Washington University.

"What we are safeguarded against now is
another crisis that is similar," she said. "We will never have another
mortgage crisis. The problem with this is, if you look at finance
crises, nothing ever repeats itself."

The new law will also mean
more work for the Pennsylvania Securities Commission. Under the
financial reforms passed Thursday by Congress, it will now be
responsible for monitoring most financial advisers who manage between
$25 million and $100 million in assets.

That’s about 140 more
firms for the commission’s 14 examiners and investigators to keep an eye
on, meaning routine exams may become less frequent. The state
commission currently licenses and inspects about 700 firms.

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A
few changes

Here are a few lesser-known changes included in the
financial reform legislation:

– Banks will be able to offer
interest-bearing business checking accounts.

– Merchants will be able
to offer discounts to cash-paying customers.

– FDIC deposit
insurance, increased in 2008, will remain at $250,000.