Fed Issues Final CARD Act Rules-Limits Credit Card Late Fees

The Federal Reserve issued its final rules as part of the CARD Act of 2009. Their new rules work to help protect consumers from high late fees and other penalties.

Here’s a rundown of the new rules:

Late Fees Capped at $25

-First-time offenders, paying late, can only be charged a maximum of $25.  This is great for those who accidentally forget about a bill or it genuinely gets lost in the mail.  The average late fee is about $38.  Should you be paying late?  No, but the $25 cap makes the late fee more reasonable for those who usually pay on time.

Repeat offenders can be charged $35.

-If you have more than one late fee in six billing cycles then the credit card company can charge you $35 for your late payment.  Seems fair to me.  We all make mistakes but more than once in six billing cycles and you really need to figure out a better system to pay your bills on time.  Still, the fee is lower than the average.

Credit Card issuers can charge higher late fees if they can show that the costs of resolving the late payments are higher than normal.

– I’m thinking here that this refers to people who habitually pay late or tend not to pay.  A higher fee should add a greater incentive to make sure you pay and could also cover costs of mailing, phone calls, and sending accounts to collections.

You can’t be charged a fee that exceeds the minimum payment or over-the-limit amount.

-From the Federal Reserve: “if your minimum payment is $20, your late payment fee can’t be more than $20. Similarly, if you exceed your credit limit by $5, you can’t be charged an over-the-limit fee of more than $5.”  I wonder if credit card issuers will consider raising minimum payment amounts as a result?

Inactivity fees are banned.

– Honestly, inactivity fees are totally not fair.  A person shouldn’t be charged because they don’t want to incur credit debt.  I like this rule.

Multiple fees for one violation can’t be charged.

– One violation or late payment means you get charged only one fee.  Some card companies pile on the fees.

Credit card issuers that have increased rates since Jan. 1, 2009 must re-evaluate the rate increases.

– Many credit card companies raised rates on consumer’s cards before the CARD Act went into place.  It was their way of getting higher rates in without having to account for it.  Well, the Fed wants companies that did this to review the accounts and, if appropriate, reduce the rates.

These new rules go into effect August 22, 2010.

All said, I think this is a step in the right direction. For too long, card companies have had their way with consumers.  The CARD Act of 2009 is a nice piece of legislation that helps keep consumers on even ground with the card companies.  I’m not against high interest rates or fees per se, hey we are taking a loan out with the card companies when we use their cards, but the rules need to be fair and easily understood.

What do you think of these final rules in the CARD Act?

FRB: Press Release–Federal Reserve announces final rules to protect credit card users from certain practices–June 15, 2010
FRB: Credit Card Rules
Fed caps late fees for credit card payments
Fed rules to cap late fees on credit cards, ban inactivity fees

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Published or updated February 17, 2015.


  1. I’m glad that you had a chance to dig through the dry fed documents and post these for everyone. I’m quite happy about the inactivity fee removal and the over the limit rule. Who would let a charge go through knowingly over the limit for reasons other than to charge a huge fee.

    • Haha, the Fed has made some pages more reader friendly to help consumers out so it’s not all dry.

      What would be nice is card terminals that tell you when you hit your limit and then give you the option.

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