WASHINGTON – The Federal Reserve issued new rules yesterday to implement last year’s Credit Card Accountability Responsibility and Disclosure Act, which will cap most late payment fees at $25.
The rule also bars lenders from charging a fee that exceeds the amount of the violation. For example, if a cardholder is late making a $25 payment, the penalty fee can't exceed $25. Many issuers now charge late fees up to $39.
The Fed also directed card issuers to reconsider interest rate hikes imposed since the beginning of 2009. The legislation prohibits banks from increasing interest rates on customers' existing balances. But while the law was enacted in May 2009, the interest-rate provision didn't take effect until Feb. 22, 2010. In the months before that date, many banks raised interest rates, even for customers who paid their bills on time.
The new rules also ban inactivity fees, such as fees charged to cardholders who don't use their card to make new purchases; and bar card issuers from charging multiple fees based on a single late payment or other single transgression.
