Last Round of Credit Card and Gift Card Federal Rules Changes Create Lower Fees, More Protections
Patrick-Murray Administration's Office of Consumer Affairs
Credit Card changes
- Late payment fees: Generally capped at $25, or the amount of the minimum payment due, whichever is smaller - exceptions are permitted if the credit-card company can show that its costs justify a higher fee; or, if one of your last six payments was late, you may be charged up to $35;
- Over the limit fee: You cannot be charged more than the amount by which you exceeded your credit limit - so a $10 over-credit-limit charge cannot cost you a fee of greater than $10;
- Inactivity fees: No "inactivity" fees for not using your credit card;
- Interest rate increases: Interest rate increases must be explained to you (why the rate was increased); and the credit card company must re-evaluate that rate increase every six months - and reduce your rate within 45 days of the review if it determines that a decrease is warranted.
Gift Card/Gift Certificate changes
- Disclosure: Any fees applicable to a gift card must be disclosed on the card itself, or on the packaging that comes with the card (often a heavy paper "sleeve," that comes with the card);
- Inactivity/maintenance/card-re-loading/usage fees: While gift cards may feature fees for not using the card, or for "account maintenance," "usage," or for adding value to the card, fees for inactivity cannot be imposed until you have not used the card for at least twelve months; and you can only be charged one fee per month for each applicable category of the other fees;
- Limits on expiration dates/no fee: The value placed on the card at purchase must be good for at least five years - if the card has a shorter expiration date than that, you must be able to obtain a replacement card for no fee; however, fees can still be imposed for initial purchase of a card, or to replace a lost or stolen card.
"This latest round of rules is very positive by making it clear to consumers what credit-card companies can charge for fees, and setting limits on how large those fees can be," said Barbara Anthony, the Undersecretary of the Office of Consumer Affairs and Business Regulation. "Taken with regulations previously put into effect over the last year, the balance in the relationship between consumers and credit-card companies is far better than it was in the past."
The changes were signed into law by President Obama last year, and improved consumer protections and rights in three stages. In August 2009, changes were made to billing cycles and created timeframes for notice when account terms change. In February 2010, regulations regarding payments, notice and billing for consumers, and marketing to college students and younger adults took effect.
While the new rules create a better environment for consumers, Undersecretary Anthony encourages consumers be educated on the terms of their credit-card accounts, and to take steps to responsibly manage their credit cards.
"Consumers should know what their interest rate is, when their payments are due each month, and what fees and other costs are involved with their credit cards," Undersecretary Anthony said. "Wisely using credit cards, particularly by paying off the balances every month or keeping balances to manageable levels, can alleviate a lot of problems that come with statements full of big balance numbers."
For more information on the new regulations, visit the Federal Reserve System's website.
The Patrick-Murray Administration's Office of Consumer Affairs and Business Regulation is committed to protecting consumers through consumer advocacy and education, and also works to ensure that the businesses its agencies regulate treat all Massachusetts consumers fairly. Follow the Office at its blog, Consumer Connections, and on Twitter, @Mass_Consumer.