WASHINGTON (7/8/10)—The Credit Union National Association (CUNA) Wednesday issued an analysis of the last final rule that implements provisions of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act. The CARD Act was enacted last year to prohibit and restrict a number of credit card practices. This final rule implements provisions, effective Aug. 22, intended to protect credit card users from unreasonable penalty fees and that require card issuers to reconsider interest rate increases every six months after an increased rate becomes effective. Among other provisions, the final rule:
* Limits penalty fees to $25, unless there are repeated violations or the issuer can demonstrate that a higher fee represents a reasonable portion of the cost it incurs as a result of these violations; * Prohibits card issuers from charging penalty fees that exceed the dollar amount associated with the violation. For example, if the minimum payment is $20, the late payment fee can no longer exceed $20; * Bans inactivity fees or fees for closing and terminating the account; * Prevents card issuers from charging multiple penalty fees based on a single violation; * Implements requirements that card issuers inform consumers of the reasons for a rate hike; and * Requires that for rate increases since Jan. 1, 2009 , issuers must review these increases every six months and reduce the rate if the reasons for the increase no longer apply.
The rule applies to credit cards, but not to home equity lines of credit accessed by credit cards or to overdraft lines of credit accessed by debit cards. For more on the Fed’s final rule, use the resource link below.