One part of the Credit CARD act that didn’t get nearly enough press was a requirement for the Fed to create rules forcing credit card fees to be “reasonable and proportional”. So yesterday, the Fed jumped in the ring with the following proposals to protect consumers:
- No inactivity fees. Your bank won’t be able to siphon money out of you when you’re not using your card.
- No double-dipped fees. So you can’t be charged twice for the same penalty (like a late payment).
- No disproportional fees. Specifically, they can’t charge you a fee that’s higher than the dollar amount involved in the offense. I.e. if you miss a $10 payment, they can’t charge you a $50 penalty.
- Card issuers have to specify why they’re raising rates. So if your bank is raising your interest rate, they not only have to tell you in advance, but they have to give you a specific reason why.
- Reevaluate reasons for raising rates since Jan 2009. If a bank has raised rates in the last year (which they all have) it will be required to reevaluate its reasons and lower rates if that’s called for.
Ever since the CARD Act was announced, banks have been coming up with new (and quite creative!) fees to make sure they don’t lose their golden goose, so it’s nice to see the Fed step in and try to nip that in the bud.
The rules around limiting fees are unambiguously good for consumers, but I’d love to hear what kind of reasons they use to justify raising rates (probably good material for a humor site, note to self). And I have a hard time believing that banks are going to spend much time reevaluating their reasons for raising rates, finding religion, and consequently lowering them. They have a long and illustrious history of doing precisely the opposite.
If you have any opinions on ways the Fed can help, they’re taking public comment on the regulations for 30 days, and the information is on their site. Also feel free to comment below.
These rules are intended to go into effect on August 22, 2010.