As more and more consumers have been complaining about the recent rise in interest rates, credit card penalty fees, and the unscrupulous practices of many banks, the Federal Reserve on Wednesday purposed a new law that would place strict limits on these outrageous fees. They also said they will take into consideration lowering the recent rise in interest rates as well.
This is the third stage in the government’s credit card legislation that came out last May. The majority of provisions for this legislation have already been in effect.
One of the most necessary changes that come from this proposal is the fact that the Fed is seeking to put a limit on late fees and various penalty fees. According to the Fed, these fees should not exceed more than the amount of the consumer’s violation.
As of right now most major credit card issuers are charging an average penalty fee of $39, no matter how small the violation was. Many consumer advocates are raging over this fact because a small overdraft fee of five dollars can easily cost the borrower forty-five dollars for something as small as a pack of cigarettes.
In this new proposal it outlines that a borrower who goes over their limit by five dollars should not be charged the same as someone who goes over their limit by five-hundred dollars. This new law would make sure that someone who went over their limit by five dollars, will only be charged a penalty fee of five dollars. They are also seeking to place a limit on late payment fees as well.
Along with limiting common fees, this will also stop these companies from charging multiple penalty fees for one transaction. No longer will a consumer be charged both a return fee and a late fee for the same transaction.
The new rules are said to be in effect on Aug 22 this year.