The Federal Reserve has approved the final set of rules for the Credit
Card Accountability Responsibility and Disclosure Act (CARD) of 2009.
The new rules, which will limit credit card companies' ability to
charge penalty fees, will go into effect August 22, 2010. Listed below
is a summary of the rules and how they may impact credit card consumers:
- With few exceptions, a credit card issuer cannot charge an account holder
a penalty fee of more than $25 the first time they bounce a check, pay
late or go over their credit limit. However, if the credit card account
holder has made a habit of breaking these rules, a higher penalty fee
would be legal. Also, if the credit card issuer can prove that a higher
penalty fee is reasonable because the cost of the violation is higher than $25.
- Credit card issuers cannot charge a late payment penalty fee that is larger
than the dollar amount associated with the credit card account holder's
late payment. For example, if a credit card account holder has a minimum
payment requirement of $50 and misses that payment, the late penalty fee
could not exceed the $50 minimum payment requirement.
- Credit card issuers are prohibited from charging multiple penalty fees
for one late payment or violation. For example, charging a customer, a
penalty fee for late payment, over-the-limit charge and a missed payment
fee would be strictly prohibited.
These rules could save credit card consumers thousands every year if implemented
and enforced by credit card companies and regulators. Penalty fees were
common place before this rules and astronomical in many cases.