Credit Card Industry Rules

As of 2010, new credit card industry rules have been introduced to level what some consumers and Congressional representatives considered to be an unfair playing field. Credit card industry rules address things like penalty fees, interest rates, changes to balance availability and fair reporting practices.

Penalty Fees

In June 2010, the Associated Press reported that the Federal Reserve established an industry-wide prohibition among U.S. credit card companies, forbidding them to charge more than $25 when customers pay their bills late. The rule also forbids credit card companies to charge multiple penalty fees on a single late payment. The rule is scheduled to go into effect beginning in August 2010.

Non-Activity Fees

Former credit card industry rules permitted credit card companies to charge non-activity fees to consumers who were not using their cards to make new purchases. Beginning in August 2010, credit card industry rules will not allow companies to charge non-activity fees.

Interest Rates

In 2009, President Barack Obama signed the Credit Accountability, Responsibility and Disclosure Act Of 2009 (sometimes called the Credit CARD Act) into effect, changing credit card industry rules so that interest rates on existing card balances could not be raised retroactively.

Interest rates on new transactions can only be increased after one year. Credit card industry rules also permit companies to raise interest rates in instances where a promotional rate expires, a customer pays late or the card contains a variable rate.

When customers have balances involving multiple interest rates, payments must be directed toward the balance with the highest interest rate. Previously, industry rules permitted companies to direct payments toward balances with lower interest rates to prolong payment periods.

Opt-Out Rules

The Credit CARD Act also established opt-out rules for consumers. Former credit card industry rules allowed credit card companies to implement significant policy changes to consumer accounts without substantial notification. Current rules require credit card companies to offer consumers the chance to opt-out of significant policy changes.

Having advance notification on significant policy changes allows consumers time to shop around if they no longer want to continue their existing policy. If consumers decide to end their policy, they have five years to pay off the balance under their existing contract.

Rules require that consumers be notified with 45 days of the intended change.

Payment Rules

Consumers have three weeks (21 days) to make payments after statements are mailed or delivered. They may pay any time until 5 p.m. on payment due dates without receiving additional penalties. Payments due on holidays or days when the company is closed arent subject to late penalty fees under the Credit CARD Act.

Notification Rules

Credit card industry rules now require companies to disclose to consumers how long it will take them to pay off current balances if they choose to pay only the minimum required payment. Companies must also disclose how much consumers would have to pay each month in order to pay off the entire balance within three years or 36 months.