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The Federal Research Board approved a final rule ^[3] today regarding fees for late payment, penalties, inactivity fees, and other similar charges. The rule amends Regulation Z, Truth in Lending ^[4], and governs the following:

• Late payment fees are limited to $25, unless the consumer has a history of violations or the issuer can show the higher cost is justified by the expense associated with late payment.
• Penalty fees cannot exceed the dollar amount associated with the violation. A $39 fee for a late payment of $20 minimum payment is prohibited, the fee can at most be $20.
• Safe harbor fees – Issuers can avoid scrutiny by limited their fees to the “safe harbor” values of $25 for the first violation, $35 for any additional violation of the same type during the next six billing cycles (the rule that the penalty cannot exceed the violation still apply).
• Inactivity fees are prohibited.
• Multiple fees for a single violation are prohibited.
• If an issuer increased interest rates since 1/1/2009, they must evaluate the reasons for the increase and reduce them if appropriate. Issuers must use reasonable methodologies to determine this and review “no less frequently than once every six months.”

You can read the actual document here ^[5] with a summary of the major pieces of the final rule starting on page 4.

These rules will go into effect August 22, 2010.

(Photo: epicharmus ^[6])