by Alison Storm | 06/18/10
The rules in the Credit CARD Act of 2009 keep coming. The Federal Reserve handed down the final set of rules this week, which will go into effect on August 22. These new rules deal with penalty fees and consumers' rights to have their interest rate reevaluated if it's increased. Here are some of the things that the new batch of credit card rules accomplishes:
- It prevents credit car companies from tacking on fees that are bigger than the charge they relate to. For instance, if your minimum monthly credit card payment is $10, you can't receive a $39 late fee.
- Most late fees will be capped at $25.
- Consumers can't be penalized multiple times for one late payment.
- Credit card companies aren't allowed to charge a fee for inactivity on an account.
- Banks are required to review interest rate increases every six months and if it's appropriate they'll have to lower them.
- Banks must provide a 45 day notice of any plans to increase rates. And they also have to explain why they're raising rates.
Some feel like these new rules aren't strict enough. Bankrate.com talked to the director of the Pew Safe Credit Cards Project, Nick Bourke who told them, "We ought to see most people being subject to lower penalty fees. Right now, Pew's research shows that most people with credit cards will be subject to a $39 late fee. But as a result of these rules, we should see most of those fees come down to about $25."
However, banks can charge more than $35 if they can justify that a cost was incurred as a result of the late payment that would require issuing a higher fee. Bourke said in the interview the rules should have been tougher when it comes to penalty interest rates. He says currently the median penalty interest rate is at 29.9 percent among the top 12 largest bank card companies. "Issuers remain free to charge whatever penalty interest rates they want on seriously delinquent accounts," he says.