Federal Reserve Board Approves New Consumer Credit Rule
The Federal Reserve Board of Governors approved a final rule on June 15 that shields credit card users from unreasonable penalty fees. The new rule also requires card issuers to review recent increases in interest rates.
"The new rules require that late payment and other penalty fees be assessed in a way that is fairer and generally less costly for consumers," Federal Reserve Governor Elizabeth A. Duke said in a recent statement.
Final rule bans high fees, multiple penalties
Additionally, credit card issuers are prohibited from charging penalty fees that are higher than the consumer's violation of the account terms. For example, issuers can no longer charge a $39 penalty fee if a consumer is late making a $20 minimum payment. Instead, the fee would be capped at $20.
The new rule also bans "inactivity fees," which are charged when a consumer fails to use the credit card within a certain time period, and prohibits multiple penalty fees for a single violation of the account terms, such as an over-the-limit transaction or late payment.
More transparency, review of rates required
June 29, 2010