Penalties and APR increases kept in check by new credit card rules

According to press releases by the ICBA and NFCC, new credit card rules effective Aug. 22 will protect consumers by only allow reasonable penalties and late fees to be charged by the credit card companies.These rules come as part of the Credit Card Accountability, Responsibility, and Disclosure Act (CARD Act).

“As a result of the CARD Act, consumers have an added layer of protection related to their credit cards,” said Gail Cunningham, spokesperson for the NFCC in its press release. “In addition to being familiar with these provisions, consumers need to open their credit card statements promptly, and read all inserts that accompany the monthly mailings. These simple steps are a critical part of creating a financially stable life.”

The new rules forbid late fees of more than $25 unless one of a consumer’s last six payments was late or penalties incurred by the company as a result of the late payment warrant a late fee of more than $25. The new rules also prohibit late fees that are greater than the balance due for the billing period. For example, if only $15 dollars is owed, the late fee cannot be more than $15.

In addition, the new credit card rules also govern inactivity fees and over-the-limit fees. This means that consumers cannot be penalized for not using their cards. If a consumer spends more than a line of credit allows, any overage charges cannot be any more than the additional money spent on the account. For example, if a consumer spends $20 over the credit limit, the over-the-limit fee cannot be more than $20.

Also, in the interest of protecting consumers, credit card companies cannot charge more than one penalty for any single event or transaction. For example, a consumer cannot be charged a late fee and an over-the-limit fee for any single payment.

The new rules also extend to cover Annual Percentage Rates. A credit card company must explain any APR increases. Additionally, the credit card company must re-evaluate such increases every six months and decrease the rate within 45 days of the review if applicable.

For more information about the new credit card rules, visit the Federal Reserve’s website:

Read the full press release from the ICBA below:

ICBA Wants Consumers to Be Aware of New Rules for Credit Cards

Washington, D.C. (August 9, 2010)—The Independent Community Bankers of America (ICBA) and the nation’s nearly 8,000 community banks want consumers to be aware of new rules governing penalty fees and rate increases on personal credit cards that will go into effect August 22, 2010. The changes do not apply to traditional corporate cards.

“These new rules are meant to protect consumers, but the best protection is to be well informed. Community bankers want our customers to have the information they need to manage their credit wisely and to make sound financial decisions,” said Jim MacPhee, ICBA chairman and CEO of Kalamazoo County State Bank in Schoolcraft, Mich. “If you have any questions about how the new rules will affect you, the best person to talk to is your community banker.”

Beginning August 22nd, your credit card provider may only charge reasonable penalty fees. Specifically, you cannot be charged for:
* A late payment fee of more than $25, unless:
one of your last six payments was late, in which case your fee may be up to $35; or the costs incurred as a result of late payments justify a higher fee.
* A late payment fee that is greater than your minimum payment. For example, if your minimum payment is $20, your late payment fee cannot be more than $20.
* More than one fee for a single event or transaction. For example, you cannot be charged more than one fee for a single late payment.
* Inactivity fees, such as fees for not using your card.

According to the new rules on rate increases, if your credit card provider raises your Annual Percentage Rate (APR), it must tell you why. It must re-evaluate that rate increase every six months and it must reduce your rate within 45 days after completing the evaluation, if appropriate.

To learn more about the new credit card rules, visit the Federal Reserve’s website. For more information about community banks, visit To find a community bank, visit ICBA’s community bank locator by clicking here.