Credit Card Act II

Just weeks after the new credit card rules went into effect, the Federal Reserve has proposed new rules to counter moves made by credit card issuers in reaction to the first set of rules.

Follow me? Okay good. See this is the problem when it comes to new regulations – they are quickly circumvented, and often exacerbate matters.

The Credit Card Accountability Responsibility and Disclosure Act (CARD Act), which became law on February 22, prohibits arbitrary interest rate increases, ends double-cycle billing, and eliminates negative payment hierarchy.

But these changes, among others, have forced credit card issuers to look for new streams of revenue, including charging inactivity fees if a credit card isn’t used during a certain period.

The new proposed rules, which would take effect in late August, would ban that practice, and bar companies from charging a customer a penalty fee that exceeds the dollar amount involved in the corresponding misstep.

In other words, if you failed to make your minimum payment of say $10, you couldn’t be charged any more than $10 for the violation.

Typical late fees are $30 or more, even if a the balance or minimum payment is well below that.

Card issuers would also be prohibited from charging customers multiple times for the same violation.

Credit card issuers who have raised interest rates since January 1, 2009 would also need to evaluate whether the circumstances involving the increase have changed, and if so, lower the rate accordingly.

Additionally, issuers would need to disclose to consumers the reasons tied to any rate increases.

Stay tuned for Credit Card Act III.

Related Topics:

1. More New Credit Card Rules Coming Soon
2. Fed to Propose New Credit Card Rules
3. Credit Card Rates Highest Since 2001
4. Credit Cardholders’ Bill of Rights Summary
5. How Are Credit Card Minimum Payments Calculated?