Credit Card Reform: Fewer Abusive Fees, Penalties 3 Years Later

Credit Card Reform Three Years Later Means Fewer Abusive Fees, PenaltiesMany consumers may not realize that three years ago this month, the broadest credit card reform laws ever took effect, putting an end to sudden sky-high rate hikes, limiting abusive penalty fees and creating dozens of other protections.
The most obvious change is probably in your monthly statements. The reform required the box that gives you a rundown on how long it will take you to pay off your balance if you only make minimum payments.
It will also tell you how much you would need to pay each month in order to pay off your balance in three years.
Most of the provisions of the Credit Card Accountability Responsibility and Disclosure Act of 2009, or Credit CARD Act, took effect Feb. 22, 2010.
Since then, credit card penalty fees have come down, so have surprise interest rate increases. Credit card companies must inform a consumer 45 days ahead of an increase in rates, or changes in fees, or other significant changes in the terms of an account.
All thanks to the reform laws.
Three years ago, the national credit card average rate was 14.62 percent, reported by CreditCards.com for the week ending on Feb. 24, 2010. Currently, the national rate is at 14.96 percent for the week ending Feb. 13, 2013.
A slight nudge upward, but nothing like what the critics of the reform laws suggested would happen – across-the-board average rate hikes that would offset lower penalty fees collected by the card issuers.
Yes, there has been an uptick in annual fees on some new credit card offers.
And some credit card providers have become overzealous in pushing credit-monitoring or “payment protection” add-on services — to the point of drawing big fines from U.S. watchdog agencies.
But competition among card issuers has remained high for fresh, good-credit customers. So much so that there has been a surge in low-rate introductory offers. longer terms on low-rate balance transfer deals, and an expansion of points/rewards programs.
Probably the biggest advantage to consumers has been the sharp decline in late fees or penalty fees. This has caused a reduction in fee revenue to the card providers, but a little more spending money for consumers.
Penalty fees had been as high as $39, but the Federal Reserve implemented a $25 limit. In addition, you cannot be charged a late payment fee that is greater than your minimum payment.
For example, if your minimum payment is $20, your late payment fee can’t be more than $20. If you exceed your credit limit by $5, you can’t be charged an over-the-limit fee of more than $5.
Additionally, credit card companies are required to obtain permission from the consumer before charging fees for transactions that exceed the credit limit.
If a consumer “opts-in” to allowing transactions that go over the credit limit, your credit card company can impose only one fee per billing cycle. The opt-in can be revoked at any time.
If your credit card company requires you to pay fees (such as an annual fee or application fee), those fees cannot total more than 25 percent of the initial credit limit.
For example, if your initial credit limit is $500, the fees for the first year cannot be more than $125. This limit does not apply to penalty fees, such as penalties for late payments.

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