Posts Tagged ‘late payment fees’

New Rule By Fed Limits Credit Card Late Fees & Penalty Fees

Yesterday, the Federal Reserve issued a new rule that addresses unreasonable late fees and other penalty charges and requires credit card companies to re-evaluate any interest rate increases they’ve made since January of 2009.

The new rule does the following:

1: Prohibits late fees greater than $25 for the first late payment unless the credit card company can demonstrate that such late payments cost them a greater amount.

2: No penalty fee may exceed the dollar amount of the violation. This means that if you go over your credit card limit by $10, the credit card company can’t charge you more than $10. Likewise, if you’re late on your minimum payment of $35, the penalty associated with missing this payment can’t exceed $35.

3: Prohibits charging inactivity fees on dormant accounts. No longer can credit card companies charge you just because you aren’t using the card. They still can close your account, however.

4: Credit card companies are required to reconsider any interest rate changes they’ve made since January 1, 2009 and reduce them if they can’t be justified.  While not an interest rate ceiling, which would be better, this part of the rule makes credit card companies reduce the rates they inflated to compensate for the CARD Act’s effect on their bottom line.

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