New Credit Card Protection Rules Effective This Year

The Federal Reserve developed new rules to protect credit card holders from excessive penalties for late payment and other penalties. This is the response of the Fed from the fury of the public and the congress from abusive credit card companies.

Rep. Carolyn Maloney, a major advocate of this change believes that this move will protect consumers from the worst abuses from credit card companies. The Congress have been pushing the Fed to put into practice the new credit card protection laws which was signed into law by the current US president, President Barrack Obama, last year.

The rules have prohibited credit card companies from issuing penalty charges of more than $25 when a customer pays a bill late. The Fed have made it clear that any credit card company that would charge higher than the said amount associated with the customer’s violation is now punishable by law. Aside from this, the Fed has banned credit card companies from collecting what is known to be “inactivity” fee. Inactivity fees take effect when a customer does not use his credit card to make purchases. The said rules also forbade credit card companies from making multiple fees from a single overdue payment.

On top of these, credit card companies are much persuaded to think over and reassess their imposed rates on their customers. This action by the government already began the previous year. Some companies have been forced to start their rate increase at the first phase of these new credit card protection rules earlier this year. The Fed’s first set of rules were developed to save consumers from the sudden increase of interest rates on their credit cards accounts.

Fed Governor Elizabeth Duke who is the central bank point person believes that these new rules will prompt companies to assess the pricing of their fees and penalties. This way, fees can become fairer and less costly for all consumers. She also believed that credit card companies must reevaluate their interest rates, and at best, make action to reduce the rate, and consequently, the burden on their clients.

The American Bank Association has said that the banks and other credit card companies would try their best to work on and implement these new rules quickly and diligently.

With the Congress’s redesigning the country’s financial regulatory structure, the Fed might have a lesser influence over the consumer’s protection.

These new rules are set to take effect on August 22 of this year.