Fed Proposes Caps on Credit Card Late Fees, Overlimit Penalties
The third and final wave of new credit card regulations covered by the Credit CARD Act take effect this August, and the Federal Reserve recently released draft proposals to clarify pending limits on rates and fees. The Fed's new rules would cap overlimit penalty fees to the amount of the overage. Likewise, card issuers could only issue late payment fees for the amount of a missed minimum payment.

Although the second phase of Credit CARD Act regulations required lenders to make over-the-limit spending an "opt-in" account feature, some cardholders choose to exceed their credit limits to prevent retail store embarrassment or to ensure that routine bills get paid on time. However, capping overlimit fees to the actual overage amount can protect cardholders who exceed their limits by just a few dollars.

Credit card industry executives suggested to reporters that another government clampdown on profit-generating fees could cause issuers to make another round of sweeping account changes. One industry advocate told USA Today that the Fed's proposal could require all credit card account holders to pay more for their account privileges, even after many banks imposed new or higher annual fees in late 2009.

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Joe Taylor Jr. is an internal business consultant for a Fortune 500 company, who writes about finance, culture, and design. He holds a Bachelor of Science in Communications from Ithaca College.