Credit card late fees capped
OnlineGuideTo.com — The Federal Reserve Board has limited the amount of money U.S. banks can charge customers who do not pay on time.
Credit-card issuers are now prohibited from charging consumers more than $25 for paying late unless the card holder has “engaged in repeated violations.”
Some banks have been charging up to $39 for late payments.
Under the new rule a single late payment within a six-month period will cost you up to $25. In case of repeated violations banks can charge up to $35.
Penalty Fees
The Fed has also banned banks from charging multiple penalties on a single late payment.
The new regulations also prevent card companies from issuing any penalty charges larger than the amount of the violation. For insance, if you exceed your spending limit on a card by, say, $10 the penalty cannot exceed $10.
Inactivity Charges
Always eager to look for ways to squeeze more money out of their customers, some banks currently impose so-called inactivity charges for customers who do not use their credit cards in a given month.
The Feds have also banned those fees.
Credit Card Consumers’ Bill of Rights
The new rules, which will go into effect on August 22, are part of the Credit Card Accountability Responsibility and Disclosure Act (CARD) passed by Congress last year.
Interest Rate Increases
“The new rules require that late payment and other penalty fees be assessed in a way that is fairer and generally less costly for consumers,” said Federal Reserve Governor Elizabeth Duke in a statement.
“Card issuers must also reevaluate recent interest rate increases and, if appropriate, reduce the rate,” Duke said, referring to the Fed’s directive for credit issuers that have increased rates since Jan. 1, 2009 to consider reducing those rates,
Consumer groups commend the Federal Reserve Board for prohibiting inactivity fees and imposing some clear limits on penalty fees, but they are disappointed that the Fed didn’t take a harder line with respect to interest rate increases.
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