November 23, 2009
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News: Reasonable Credit Card Fees
The new credit card reform act that is scheduled to become effective in February 2010 has language in it that pertains to “reasonable penalty fees.” The provision has left many card companies and credit card consumers at a loss. Reasonable would not exactly be what most would consider defined boundaries. Criticism of the provision says that these unclear boundaries could provide a loophole for credit card companies to implement new fees. A great deal of emphasis has been placed on other provisions of the act that govern interest rates and late payment penalties that have taken the focus off this questionable clause.
Credit card customers have already begun to see some new fees that could quite possibly fall within the guidelines of the reasonable clause. Bank of America recently announced that it will be experimenting with an annual fee ranging from $29 to $99. Although the giant credit card company says it is merely a test, there is speculation that they may implement the fee on card accounts that do not carry a balance forward. After all, banks make money on the interest rate income from existing balances. If the customer is paying off balances in full, they are basically paying nothing for the service. Citibank has already begun charging customers a fee if they don’t charge a designated amount over a particular time period. Once again, such actions will only serve to penalize the responsible cardholder.
These fees are just a few examples of what credit card customers have to look forward to as the Federal Reserve continues to debate exactly how to define “reasonable and proportional” fees. Congress has assigned the task of establishing the standards which will define penalty fees or charges and given them guidelines that take into consideration several factors. First, the lenders cost due to consumer violation; second, the action taken by the cardholder in the violation; third, the conduct of the cardholder; and lastly, any other factor that they deem necessary.