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Press Release
June 15, 2010

Federal Reserve announces final rules to protect
credit card users from certain practices
For immediate release
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The Federal Reserve Board on Tuesday approved a final rule to protect
credit card users from unreasonable late payment and other penalty
fees and to require credit card issuers to reconsider interest rate
increases imposed since the beginning of last year.
"The new rules require that late payment and other penalty fees be
assessed in a way that is fairer and generally less costly for consumers,"
said Federal Reserve Governor Elizabeth A. Duke. "Card issuers must
also reevaluate recent interest rate increases and, if appropriate, reduce
the rate."
Among other things, the final rule, which amends Regulation Z (Truth in
Lending):
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.

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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.
The final rule represents the third stage of the Federal Reserve's
implementation of the Credit Card Accountability Responsibility and
Disclosure Act of 2009, which was enacted in May 2009. The provisions
of the Act addressed in this rule will generally go into effect on August
22, 2010.
The notice that will be published in the Federal Register is attached.
Consumers can learn more about changes to their credit card accounts
by accessing a new online publication, "What You Need to Know: New
Credit Card Rules Effective Aug. 22." It explains key changes
consumers can expect from their credit card companies as a result of
the third phase of the new credit card rules. Additional information about
credit cards can be found on the Board's website at:
http://www.federalreserve.gov/creditcard/.
Federal Register notice: HTML | 2 MB PDF

Last Update: June 15, 2010

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BOARD OF GOVERNORS of the FEDERAL RESERVE SYSTEM
20th Street and Constitution Avenue N.W., Washington, DC 20551