The Federal Reserve Board approved a 
final rule on June 15th to protect credit card users from unreasonable late payment and other penalty fees and to require credit card issuers to reconsider interest rate increases imposed since the beginning of last year. The final rule represents the third stage of the Federal Reserve’s implementation of the Credit Card Accountability Responsibility and Disclosure Act of 2009, which was enacted in May 2009. The provisions of the Act addressed in this rule will go into effect on August 22, 2010, that is today. What you need to know about these new rules?
The following is the summary of changes that will go into effect today, quoted from Federal Reserve Board.
Reasonable penalty fees
Let’s say you are late making your minimum payment.
- Yesterday: Your late payment fee may have been as high as $39, and you likely paid the same fee whether you were late with a $20 minimum payment or a $100 minimum payment.
- Under the new rules effective today: Your credit card company cannot charge you a fee of more than $25 unless:
- One of your last six payments was late, in which case your fee may be up to $35; or
- Your credit card company can show that the costs it incurs as a result of late payments justify a higher fee.
In addition, your credit card company cannot charge a late payment fee that is greater than your minimum payment. So, if your minimum payment is $20, your late payment fee can’t be more than $20. Similarly, if you exceed your credit limit by $5, you can’t be charged an over-the-limit fee of more than $5.
Additional fee protections
- No inactivity fees. Your credit card company can’t charge you inactivity fees, such as fees for not using your card.
- One-fee limit. Your credit card company can’t charge you more than one fee for a single event or transaction that violates your cardholder agreement. For example, you cannot be charged more than one fee for a single late payment.
Explanation of rate increase
- If your credit card company increases your card’s Annual Percentage Rate (APR), it must tell you why.
Re-evaluation of recent rate increases
- Yesterday: Your credit card company can increase your card’s APR with no obligation to re-evaluate your rate increase.
- Under the new rules effective today: If your credit card company increases your APR, it must re-evaluate that rate increase every six months. If appropriate, it must reduce your rate within 45 days after completing the evaluation.
You might have already seen a lot of changes to your account and billing statement as a result of the credit card rules that went into effect on Feb 22, 2010. If you would like to check out a summary of some key changes you should have seen from your credit card company beginning on February 22, 2010 please check this article here – New Credit card rules effective Feb 22.
These rules don’t affect me that much personally as I always pay in full and don’t charge stuff that are not already planned/saved for. The one rule that will be beneficial to me is the No inactivity fee. I do have a number of credit cards that I don’t use anymore due to low rewards. But I would like to keep them as they my oldest cards and I already have a short credit history, so this one rule will be very helpful to me. What about you? What do you think about these rules? Will they be useful to you?
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