The U.S. Federal Reserve issued a new set of rules that are aimed at protecting credit-card users from being charged with late-payment fees and requiring issuers to review their latest increases in interest-rates.
The new rules, which take effect on Aug. 22, forbid issuers of credit-cards from charging users more than $25 for late payments. It also disallows the imposition of inactivity fees on users who are not using their cards as well as prohibits multiple fines on one late payment. The latest issuance from the Federal Reserve also requires issuers to consider reducing rates that have been increased starting Jan. 1, 2009.
In a statement, Federal Reserve Governor Elizabeth Duke said, “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.” Governor Duke further emphasized, “Card issuers must also reevaluate recent interest rate increases and, if appropriate, reduce the rate.”
In May 2009, President Barack Obama signed into law a credit-card bill that will be implemented in three phases. The provisions that are already being implemented cover:
a) the right of users to reject rate increases within a 45-day period and
b) the option to pay off balances at current rates.
The new law also requires companies to mail bills 21 days before due dates, an increase from the previous 14 days period. Kenneth Clayton, senior executive at the American Bankers Association in Washington, says “These new rules will provide greater protection, transparency and certainty for credit-card customers and the industry will work quickly and diligently to ensure that they are implemented by their effective date.”
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