New Rules To Protect Credit Card Customers Confirmed

The Federal Reserve yesterday adopted and confirmed new rules that are aimed at protecting credit card customers from getting hit by lofty late payment charges and other penalty fees. The rules are a response to widespread outrage over certain practices by banks and credit card companies.

The rules now:

1. Prevent credit card companies from charging a penalty fee of more than $25 for paying a bill late
2. Prohibit credit card companies from charging penalty fees that are higher than the dollar amount associated with the customer’s violation
3. Ban so-called inactivity fees when customers don’t use the account to make new purchases
4. Prevent multiple penalty fees on a single late payment
5. Require firms to reconsider interest rates that were imposed on customers since early 2009

The new rules take effect on August 22, 2010.

Earlier this year, another set of rules were implemented, which were designed to protect customers from sudden hikes in interest rates.