Credit Card Act of 2009 - Third phase

The Federal Reserve approved the final rule on June 15, 2010 and I have listed a summary of them below.

My question is do the new rules for this third and final phase apply only to credit cards or do they apply to all open end lines of credit?


Prohibits credit card issuers from charging a penalty fee of more than $25 for paying late or otherwise violating the account's terms unless the consumer has engaged in repeated violations or the issuer can show that a higher fee represents a reasonable proportion of the costs it incurs as a result of violations.

Prohibits 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.

Bans "inactivity" fees, such as fees based on the consumer's failure to use the account to make new purchases.

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

Requires 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.

I've got the same questions. I've been so focused on July 1st deadlines I haven't read the details of this latest issue. Good week-end reading?

Bump.

Prohibits credit card issuers from charging a penalty fee of more than $25 for paying late or otherwise violating the account's terms unless the consumer has engaged in repeated violations or the issuer can show that a higher fee represents a reasonable proportion of the costs it incurs as a result of violations.

I understand the late fee not being greater than the associated requirement minimum payment but what about the returned check fee? We currently charge $25. Will this fee have to be on a sliding scale to be in proportion to the minimum payment amount?

Well this is technically not what the regulation says. You get safe harbor at $25 and below, but if you find that you need to charge a higher fee because you lose more than $25 for every OD then you can charge an appropriate amount.

That said I expect examiners will say $25 no more unless you can prove it to them.

You must keep very good records if you expect to charge more.

Paying late and NSF's are limited to no more than the minimum payment amount, not to exceed $25.00. Second offense within a 6 month period and it can go as high as $35 (again, I think you still must not exceed the minimum monthly payment)

You also cannot charge both for the same "offense".

It looks like everyone here is talking about credit card (plastic) accounts. Do the new rules apply to open end lines of credit not accessed via a credit card?

For instance, does a consumer unsecured line of credit only accessed via account transfer or check qualify under these new rules?

As far as I understand it, the only thing that impacts open-end (not home-secured) loans under the third phase of the CARD Act is in section 226/6(b)(1)(i). Effective 8/22 and with a mandatory compliance date of 12/1/10, account opening disclosures must bold any maximum fee amounts disclosed.