New credit card rules

Headline: New Credit Card Rules Announced

Issued By: NYS – Consumer Protection Board

Affected Jurisdictions: New York

The Federal Reserve has announced new credit card rules that will take effect on August 22, 2010. The rules are intended to protect credit card users from unreasonable late payment and other penalty fees and require credit card issuers to reconsider interest rate increases imposed since the beginning of last year. The new rules, on which the New York State Consumer Protection Board (CPB) commented prior to finalization, represent the third stage of the Federal Reserve’s implementation of the Credit Card Accountability Responsibility and Disclosure Act (CARD), enacted in May 2009 and advocated for by Governor David Paterson and the CPB. The new rules that take effect on August 22, 2010:

 Prohibit credit card issuers from charging a penalty fee of more than $25 (adjusted annually by the Federal Reserve Board according to the Consumer Price Index) for paying late or otherwise violating the account’s terms unless the consumer has engaged in repeated violations ( $35 for an additional violation of the same type during the next six billing cycles) or the issuer can demonstrate that a higher fee represents a reasonable proportion of the costs its incurs as a result of violations.

 Prohibit credit card issuers from charging penalty fees that exceed the dollar amount associated with the consumer’s violation. For example, card issuers will no longer be permitted to charge a $39 fee when a consumer is late making a $20 minimum payment. Instead, the fee cannot exceed $20.

 Ban “inactivity” fees, such as fees based on the consumer’s failure to use the account to make new purchases, and other fees when there is no dollar amount associated with the violation.

Prevent issuers from charging multiple penalty fees based on a single late payment or other violation of the account terms.

 Require issuers that have increased rates since January 1, 2009 to evaluate whether the reasons for the increase have changed and, if appropriate, to reduce the rate no later than 45 days after completing the reevaluation. The evaluation occurs every six months.

 Consumers can call the CPB’s toll-free hotline, 1-800-697-1220, to ask questions about the latest credit card reforms and obtain further guidance, or can email their questions.

 Instructions:  Consumers can call the CPB’s toll-free hotline, 1-800-697-1220, to ask questions about the latest credit card reforms and obtain further guidance, or can email their questions.

Consumer can read more about the CARD Act at: http://www.nysconsumer.gov/credit_card_initiative.htm