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Today the Federal Reserve Board issued a final rule on credit card penalty fees. The Credit Card Accountability, Responsibility and Disclosure Act of 2009, or Credit CARD Act, directed the Fed to set standards for penalty fees and charges that are "reasonable and proportional" to the violation. The restrictions on credit card fees take effect on Aug. 22, 2010.
Some of the key changes:
- Credit card penalty fees, such as late fees, will be capped at $25 for the first violation, however, you can be charged more if:
- The same offense occurs within the next six billing cycles. The fee cap will then be $35.
- Your issuer can prove that the costs incurred from violations justify a higher fee.
- Late fees and other penalty fees can't exceed the dollar amount associated with the violation. If you fail to make your minimum payment on time, and the minimum amount due is $15, your late fee can't be more than $15. If you go over your credit limit by $10, then the overlimit fee must be no more than ten bucks.
- Inactivity fees are banned, including annual fees imposed for nonuse. Issuers can no longer charge fees to accountholders that fail to spend a minimum dollar amount or use the card a minimum number of times.
- Issuers can only charge one penalty fee per violation.
- Issuers must tell credit card customers receiving a rate increase the reason for the increase.
- Issuers that have raised interest rates on cardholders since Jan. 1, 2009, must evaluate those rate hikes every six months, if 45-day advance notice was applicable to the rate increase. For example, the CARD Act didn't require advance notice if the account was 60 days delinquent or a promotional rate had expired. If the factors that triggered the increase have changed, the issuer must reduce the rate within 45 days of completing the review. No specific reduction is required.
Do you think the new fee cap is fair?
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I think you should be able to write off the interest you are charged on your tax return for your credit cards since the fees are often 29.99%.
I agree with the cap on late fee charges and the over the limit fees and also that the tax deduction for credit card interest should be reinstated. I feel that you should be able to make your payment anytime on the day it is due. There shouldn't be a time deadline on the day and if you don't get it there by that time, you are charged a penalty, even though you have made the payment on the due day.
I notice there's no guidelines for what constitutes a 'fair' or 'justifiable' rate increase. I quit my job at Citibank last year because of the way the company was treating their customers. The reasoning behind rate increases of more than 100% was that the company might lose revenue because of the new regulations. It had nothing to do with the individual customer's spending patterns or payment behavior. Are those rates going to be forced from 29.99 back down to reasonable levels? I doubt it.
Unless the Government reinstall the tax deduction for credit card interest, even for a 1-2 year opportunity,so that the consumer can recoupe the impact of greed on their lives and the lack of regulations on money monsters, the economy will take another 5 years to recover.
I think the rate cap for the initial infarction is fare. If a person has been a model customer, and for some reason uncharacteristically makes a late payment, then they shouldn't have to pay the same fee as a person who habitually pays late. However, I think that credit issuers should be able to charge more than $35 for people who consistently pay late. One other thing that that I'd like to see, is that creditors should be required to offer payment counseling for customers who suddenly exhibit a degradation in timely payments.