Menendez Applauds Latest Credit Card Rule, Which He Helped To Craft
Menendez was champion of credit card reform and pushed the Fed to prohibit credit card companies from circumventing the new law
June 15, 2010
Washington - Today, the Federal Reserve Board finalized its latest new rule for credit card companies, as directed by the credit card reform law passed in May 2009 and to help crack down on credit card companies attempting to circumvent the law. The new rule represents the third stage of implementation of the Credit Card Accountability Responsibility and Disclosure Act. When it goes into effect in August 2010, the new rule will:
- Require issuers that have increased rates since January 1, 2009 to evaluate whether the reasons for the increase have changed and, if appropriate, to reduce the rate.
- Prohibit credit card issuers from charging penalty fees that exceed the dollar amount associated with the consumer's violation. For example, card issuers will no longer be permitted to charge a $39 fee when a consumer is late making a $20 minimum payment. Instead, the fee cannot exceed $20.
- Prohibit credit card issuers from charging a penalty fee of more than $25 for paying late or otherwise violating the account's terms unless the consumer has engaged in repeated violations or the issuer can show that a higher fee represents a reasonable proportion of the costs its incurs as a result of violations.
- Ban "inactivity" fees, such as fees charged when a consumer does not use their credit card over a certain period of time for new purchases.
- Prevent issuers from charging multiple penalty fees based on a single late payment or other violation of the account terms.
U.S. Senator Robert Menendez (D-NJ) authored one of the first pieces of credit card reform legislation and helped craft the final reform bill that passed Congress. Earlier this year, he wrote the Federal Reserve to ask that it issue rules that prevent credit card companies from circumventing the new law: http://menendez.senate.gov/newsroom/press/release/?id=860f4c0a-b2d9-4ac9-bdda-2d18ab9cfc43. He released the following statement today:
"The credit card reform law is doing away with the tricks and traps that credit card companies have long used to squeeze hard-earned money out of responsible families. This latest common sense rule will help end the credit card company practice of charging outlandish penalty fees that don't fit the infraction. It will finally force credit card companies to take a hard look at why they increased interest rates on so many unsuspecting consumers over the past year prior to this landmark law going into effect. It will also curb the attempts by some companies to circumvent the law with new ways to charge their cardholders. As one of the original authors of credit card reform legislation and as a senator who has called on the Federal Reserve to stop companies from circumventing the law, I wholeheartedly applaud this badly-needed rule, which will help responsible families better achieve financial security."
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