California Consumer Finance Litigation : California Consumer Finance Litigation Lawyer & Attorney : O'Rielly & Roche Law Firm : San Francisco, Oakland, Bay Area, Los Angeles

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The Federal Reserve yesterday announced its final rule amending Regulation Z regarding late payment fees, interest rate changes, and other penalty fees.  The final rule makes a number of significant amendments to Reg Z, including:

• Prohibits 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 it incurs as a result of violations.
• Prohibits 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.
• Bans "inactivity" fees, such as fees based on the consumer's failure to use the account to make new purchases.
• Prevents issuers from charging multiple penalty fees based on a single late payment or other violation of the account terms.
• Requires 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.

The Fed now publishes an online credit card guide for consumers and has issued a new publication with details on the credit card changes effective August 22.