Associated Press | The Federal Reserve adopted new rules Tuesday
aimed at protecting credit card customers from getting socked by lofty
late payment charges and other penalty fees.
The rules, which take effect Aug. 22, bar credit card companies from charging a penalty fee of more than
$25 for paying a bill late. They prohibit credit card companies from
charging penalty fees that are higher than the dollar amount associated
with the customer’s violation. They also ban so-called “inactivity”
fees when customers don’t use the account to make new purchases and
they prevent multiple penalty fees on a single late payment.
The rules respond to public and congressional outrage over practices by credit card companies.
“Consumers will finally be protected from the worst credit card issuer abuses,” said Rep. Carolyn Maloney, D-N.Y., a major advocate for the changes.
In addition, the rules require companies to reconsider interest rates imposed on customers since the start of last year. Some lenders pushed through rate increases ahead of the first phase of sweeping new credit-card protections, which took effect earlier this year. Those first set of rules were designed to protect customers from sudden hikes in interest rates.
Congress directed the Fed to implement the new credit card protections in legislation signed into law by President Barack Obama last year.
“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,” said Fed Governor Elizabeth Duke, the central bank’s point person on the rules. “Card issuers must also reevaluate recent interest rate increases, and, if appropriate, reduce the rate,” she added.
Legislation in Congress revamping the nation’s financial regulatory structure could reduce the Fed’s influence over consumer protections. A Senate-passed bill would house a watchdog agency inside the Fed, but chairman Ben Bernanke would have no authority over it. A House-passed bill would set up a new agency devoted to consumer protection and would strip the Fed of some of its consumer oversight. Lawmakers are working to reconcile the bills into a final package.
If the Federal Reserve can do this now, why did they have to wait so long?
So basically lenders are now pretty much interest free forced lenders….
So basically for example a lender could loan you 1,000 dollars and you have to pay back 1,075 dollars @ 5% interest and the $25 late fee whenever you feel like it….. WOW… Oh and so what if you dont pay it back right?? they can eat the money!!!!
So people massively abuse credit and this god forsaken government makes it easier for people to ABUSE CREDIT again????
Go right ahead people and abuse this credit all you want, see what the end result will be..
No doubt Obama wants YOU to abuse credit to “stimulate the economy” but his retarded mindset doesn’t account for the notion that people will borrow and NEVER PAY THE MONEY BACK, which will only further destroy this economy which I believe is what Obamy wants.
@nick: It’s called personal responsibility. Nobody is holding a gun to the heads of the banks and forcing them to give large credit lines to unworthy borrowers. If they don’t find this to be a good line of business, then let them cut and run and invest their money elsewhere.
Note that only the most egregious, heinous abuses are being curtailed. Ordinary nickel-and-diming is unaffected. I find it odd you would want to defend the most loathesome practices as being “business as usual”. Is that what America has come to now?
June are you serious? What credit card offers 5% interest? Not many! I’d be pressed to say less 5% of them do so go ahead start your ridiculous rant with a situation that is unlikely. The fee is being capped $25 per late payment. So if a person is late 6 months in a row, they will be charged $25 each time. How does that translate to paying it whenever they like? They have to pay it before the next billing cycle comes up.
You really have no idea what you’re talking about and consider this, IT’S THE FEDERAL RESERVE that is doing this, not Obama. Get your facts straight. You’re clueless. Obama wants the economy destroyed huh? This ridiculous sentence comes right after you say that he’s wants you to abuse your credit to stimulate the economy. Your retarded mindset has you all over the place making NO SENSE AT ALL!!!!! Go find some sand and stick your head in it. You’re half way there already.
“Abuse credit”? Nick, that’s a crock of bull. If the doggone banks don’t want people to abuse credit, then they could simply deny them a credit line in the first place, or do as they are doing arbitrarily anyway–reduce the credit limit.
Besides, with the doggone interest rates being so high, which are way more than 5% on most credit cards, these banks are already taking people to the cleaners, and that’s before you even factor in the late fees.
With the interest these banks have made off of those–even the people who have great credit histories–this is the least the banks should be allowed to do.
You always hear about the banks raising the interest rate on people whose credit score is lowered, but how often do they lower the interest rate when their credit score goes up?
Joe,
BoA sent my dog an application for a Visa, should he be financially responsible for the card, or do you think the bank should scrutinize more closely how much and who they lend too?
A fee for not using the card? Stupid. Most people will cancel the card and refuse to pay the fee then.
Nick, you should watch the Frontline programs about credit card companies. It will make you absolutely sick. They do everything in their power to abuse customers, but hide the abuse in tiny print and convoluted language and they hide behind the laws of the most lax states. I have a feeling you couldn’t even state the current interest rate on your cards, or your limits, without looking them up first.
Charles, they waited so long because the Republicans were in control for 8 years and they didn’t give a crap if consumers were being abused. I’m no Obama fan but I’m glad this is an issue he’s taken on.
joe, that’s exactly what I did when one of my credit card companies told me, after 30 years of having and using that card, that they were going to start charging an annual fee if I didn’t use the card to their desired level. I closed the account.
If these credit card companies want their money back, then lessening the late-payment fees will surely help them recover their cash as people will have less of a burden on top of their monthly payment.
I have a simple solution, one we have followed for 20 some years now. Pay your bill in full each month. If you can’t afford to, then you spent too much and should return any unused items to the stores to reduce your bill. Doesn’t sound very fun, does it? Well, guess what? It will keep you solvent. That’s why we have equity in our house and credit scores of just over 800. Simple math. Why take out a “loan” at 21 percent interest?
Bank of America and Chase are among the worst abusers. They increased credit card rates on balances outstanding prior to the nex credit card law to 27% or more. Hence, some were increased from 5% and 6% to that amount without any grounds, such as late payment etc. It should be remembered that banks give under 1% for CDs. These are the major contributors to economy not recovering. Most people are not the reckless folks charing for the sake of charging. Majority of charges are usually for extraordinary expenses – health, car and home repair, college tuition.
So, instead of consumers being able to spend moneys on goods and services, they must pay 27% interest on credit card loans, so that the bank executives receive millions in bonuses.
In order for the credit card protection bill to work in reality and not be just a smoke screen, the Feds should set the upper limit of what credit card companies can charge in interest – ex % above the prime rate, which is now below 1%. Hence, who is causing the jobless recovery – the major banks are.
@ Amy,” Why take out a “loan” at 21 percent interest?”
I for one HAD to take a loan to pay for my college degree. I wish I could have paid the $30 sum thousand a year in full, however it simply wasn’t possible. It is an unfair assessment that people don’t need loans. There are clearly some circumstances where that simply isn’t true.
It is ridiculous that interest rates for paying back school loans are as high as they are. Maybe thats an interest rate that should be capped rather than the reckless spending habits of people.
@ Amy,” Why take out a “loan” at 21 percent interest? ”
I for one HAD to take a loan to pay for my college degree. I wish I could have paid the $30 sum thousand a year in full, however it simply wasn’t possible. It is an unfair assessment that people don’t need loans. There are clearly some circumstances where that simply isn’t true.
It is ridiculous that interest rates for paying back school loans are as high as they are. Maybe thats an interest rate that should be capped rather than the reckless spending habits of people.
Of course the answer is to pay credit card bills in full each month. But too many people do not, and the credit card companies have been taking heinous advantage of them, with hidden stipulations and fees in fine print. For people who have gotten in over their heads and are now making an honest effort to repay what they owe, this means that they are at the total mercy of the creditors. It’s good to see a law like this, not so anyone can get out of anything they owe, Nick jerk, but so they can pay off what they owe in full. Believe me, once you’ve been there, you don’t want to return.
Everyone is stupid. Credit cards are part of the federal reserve banking system. The stimulus money Obama gave them is just a number wrote in a ledger. This money is Fait money not worth any thing. It is then loaned to you and charged principle and interest, This is how they turn nothing into money. Its what they can collect over and above when they started with nothing. Figure it out now.