To Help Consumers, New Credit Card Rules From The Federal Reserve Board

In February of 2009 this blog warned consumers about pending credit card interest rate increases. Yesterday, the Federal Reserve Board (FRB) announced new rules to protect consumers from unreasonable late payment and other penalty fees. The new rules prevent credit card issuers and banks from charging:

• Penalty fees that are more than $25 for late payments or violations of the account terms
• Penalty fees that exceed the dollar amount of the transaction. Example: credit card issuers cannot charge a $39.00 fee for a late payment that is higher than the minimum $20 payment. Now, that late payment fee cannot exceed $20.
• Inactivity fees when consumers don't use their credit cards to make purchases
• Multiple penalty fees based on a single late payment or other violation of the account terms.Now, banks can charge only a single fee.

In its announcement, the FRB also announced rules to require banks to reevaluate every six (6) months a consumer's credit card interest rate (e.g., the Annual Percentage Rate printed on your monthly statement). The bank must explain why they are increasing the interest rate on your credit card; or lower it within 45 days.

The new rules, which are part of Credit Card Accountability Responsibility and Disclosure Act of 2009, go into effect on August 22, 2010. I highly recommend that consumers read the FRB pages about the new credit card rules that start in August, and the credit card rules that already started in February 2010.

Will these new rules be enough? Will they protect consumers adequately? What do you think?

Comments

[DE ELLIS]

It's not enough. Even people who regularly pay their balance have been handed an outrageous, albeit potential, interest rate. Their excuse was given immediately: just because.

Credit cards are only part of it. Insurance companies are allowed to look at your credit report and include credit worthiness in their rationale to keep prices high within cartel parameters. The credit reporting corporations themselves are another third party scam and a separate issue.

Thanks for all your great work.

[R. Michelle Green]

Hi George -- Frontline has done two excellent eps on this issue, one on the history of credit card fees in 2004, and a follow up in 2009 which can be seen online at http://www.pbs.org/wgbh/pages/frontline/creditcards/view/) - I highly recommend both vids...

R. Michelle Green