Consumer Action :: Cap on credit card penalty fees proposed

Keep the Information Flowing

Small contributions go a long way. Your donation to Consumer Action, a 501 (c)(3) nonprofit, nonpartisan organization, can help us cover the cost of research, writing, and translation of our materials. To keep our services free for those who need them. Select an amount to give.

Released: March 04, 2010

Cap on credit card penalty fees proposed

Source: Ylan Mui, Washington Post (Free Registration)

The Federal Reserve proposed restrictions Wednesday on penalty fees that credit card issuers can charge consumers, including limiting the amount of late fees.

One of the most significant changes would prohibit card companies from issuing penalty charges larger than the amount of the violation, a common consumer complaint. For example, a person who is late on a $20 minimum payment could not be hit with a $39 late fee. In addition, if a card’s spending limit is exceeded by buying a $2 cup of coffee, the penalty fee cannot exceed $2.

The proposed regulations represent the Fed’s latest efforts to comply with the sweeping credit card reform legislation passed by Congress last spring. The final phase of the legislation, slated to take effect in August, requires that any penalty fees be “reasonable and proportional”—and lawmakers left it to the Fed to determine exactly what that meant.

Read Full Article: Cap on credit card penalty fees proposed