WASHINGTON (CN) – Credit card issuers may charge credit card holders fees beyond the 25 percent limit on fees in the first year set under the Credit Card Act, as long as the fees are charged before the account is officially open.
The Credit Card Act limits the fees in the first year to 25 percent of the maximum credit allowed in a given year, except for late fees, over the limit fees, or insufficient fund fees.
Originally, the Federal Reserve Board, which was then responsible for regulating credit card issuers, interpreted the law to include, as part of the 25 percent limit in the first year, fees imposed before the account was officially opened.
A credit card issuer challenged the Fed’s interpretation, and a federal judge granted an injunction to prevent inclusion of credit card application fees and other costs charged before the account opens in the 25 percent limit.
While the issue was still before the courts, regulation of credit card issuers passed to the Bureau for Consumer Financial Protection. The bureau decided to clarify the limits on fees in light of the lawsuit.
Under the proposed rules, the 25 percent limit would only include fees accrued in the year after the account is opened.
The public has until June 11 to comment on the proposed rule.