New credit card rules under the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act took effect this week (See
Federal Reserve Press Release)! The Fed, in its effort to be more consumer friendly, has put out another "
What You Need to Know" about the rules. One of the big improvements is in the area of late payment fees. Under the old system, card issues could charge basically whatever fee they wanted, whether the card holder was late on a $20 payment or a $100 payment. Now, the fee is set at $25, but the card issuer can charge $35 if one of the last six payments was also late or a larger amount if the company can justify the cost for the higher fee. In any event, the fee cannot be higher than the minimum payment due. For instance, if the minimum due was $20, then the fee cannot exceed $20.
Other new rules eliminate fees for inactivity and extra fees for violating more than one part of the cardholder agreement on a single transaction.
Another twist is requiring card companies to reevaluate rate increases every six months after an increase and to reduce the rate 45 days after an evaluation, if appropriate. Remember all those rate increases companies passed onto card holders prior to the CARD Act's implementation in 2009? Issurers are supposed to lower rates for consumers if the reason for the increase no longer exists. Basically, the Fed is supposed to monitor compliance. I've not heard of any credit card issuers widespread lowering interest rates, but here's to hoping.
- JSM
