New Federal Reserve credit card rules beef up consumer protection
New credit card rules approved by the Federal Reserve on Tuesday are designed to protect consumers from interest rate hikes, heavy late fees and other penalties. Since the 2009 credit card law was passed last May, credit card companies have tried to stay a step ahead of the law with creative new fees and penalties. The new credit card rules announced Tuesday by the Fed go into effect Aug. 22. The provisions close some loopholes and complement rules in 2009 credit card law already in effect.
Credit card late fees cut
The new credit card rules are the finishing touches of the Federal Reserve’s effort to carry out the credit card legislation President Obama signed last year. Reducing credit card penalty fees was one of the principal goals of credit card legislation, but Congress charged the Fed to figure out how. CNNMoney.com reports that consumers will most immediately notice the new penalty fee limit of $25. There are some exceptions. If the payment is late a second time in a six month period, the credit card company can charge a $35 late fee. Until August 22. most credit card late fees are $39.
Credit card penalty fees limited
New credit card rules also limit penalty fees for exceeding credit limits. Forbes reports that the penalty fees cannot exceed the dollar amount of the consumer’s violation. For example, a credit card company can no longer charge a $39 fee when a customer exceeds his or her credit limit by $20. Now the fee cannot exceed $20. But that consumer could still face a permanent penalty hike on his interest rate on future purchases. Credit card companies can also no longer charge an inactivity fee on cardholders who don’t use their cards.
Credit card interest rates re-evaluated
New credit card rules also require issuers to review high credit card interest rate hikes inflicted on consumers since Jan. 2009 in the wake of a nationwide credit crunch.The New York Times reports that if your credit card company raised your interest rate after Jan. 1, 2009, it will have to re-evaluate its reasons for doing so and potentially lower the interest rate if it finds that those reasons no longer apply. The Fed hasn’t yet said how regulators will enforce this particular rule on credit card interest rates.
Need to know: new credit card rules
In a press release announcing the new credit card rules, the Fed said consumers can learn more about changes to their credit card accounts by accessing a new online publication, “What You Need to Know: New Credit Card Rules Effective Aug. 22.” It explains key changes consumers can expect from their credit card companies as a result of the third phase of the new credit card rules.