phase of federal law restricting credit card fees, interest rates begins

Final phase of federal law restricting credit card fees, interest rates begins

By Ylan Q. Mui
Washington Post Staff Writer

<...>

Limiting penalty fees

The law required the Federal Reserve to write regulations outlining how much credit card companies can hit you with for things such as late payments or over-the-limit purchases. The new rules ban them from charging fees that are larger than the infraction. For example, if you are late on a $20 payment, your penalty fee cannot be more than $20. Or, let's say you spend $5 more than your max. The charge for that cannot be more than $5.

Banning certain fees

Issuers will no longer be able to charge you an inactivity fee for not using your card. They also can only charge you one fee per infraction. So if you make one late payment, they can you only ding you once.

Containing rate increases

If a credit card company raises your interest rate, it will have to tell you why. In addition, if your rate increases, the issuer must reevaluate it every six months. If you deserve to have it lowered, the card company must comply within 45 days of the evaluation. Previously, if a credit card company hiked your rate, there was no obligation to look at it again.

Protecting gift cards

The law also established new protections for store gift cards, which can only be redeemed at one retailer, and prepaid gift cards, which may be used at many locations. All gift cards sold starting Sunday must be good for at least five years. In fact, even if you have a gift card and it has an expiration date on it sooner than that, any unspent money left on the card must be honored for at least five years. You can request a replacement for any expired gift card for free.

more

Last year, I signed the Credit Card Accountability, Responsibility and Disclosure Act into law] to put a stop to deceptive credit card practices and hold credit card companies accountable to their customers. Yesterday, the final reform provisions of the CARD Act took effect. As of today, consumers will be protected against unreasonable fees and penalties for late payments, as well as unfair practices involving gift cards. This law will also make the terms of credit cards more understandable and puts a stop to hidden over-the-limit fees and other practices designed to trap consumers. It restricts rate increases that apply retroactively to old balances. And the CARD Act prevents companies from increasing rates within the first year an account is opened.

In addition, the Wall Street Reform and Consumer Protection Act I signed into law last month will empower a new Consumer Financial Protection Bureau with just one job: looking out for consumers in our financial system. This includes making sure that credit card reforms are implemented forcefully and that big banks and lenders are living up to their responsibilities under the law. And in the wake of a terrible recession, these reforms and this independent consumer watchdog will not only protect consumers, they’ll strengthen our economy as a whole, leveling the playing field for responsible lenders and ensuring that families and small business owners are better able to make financial decisions that work for them.

More information about why your rate is going up: Since August 2009, card issuers have been required to give 45 days notice before raising your interest rate on future purchases. Now they must notify you of the reason they are imposing a rate hike, such as market conditions or a reduced credit score.

Interest rate increases must be re-evaluated: Interest rate increases dating back to January 1, 2009 and into the future must be periodically re-evaluated. When a card issuer raises your interest rate, it must review the increase every 6 months and reduce the rate in certain circumstances.

link