Update The American Bankers Association released this statement last evening, but we missed it for the newspaper's deadline:
The rules proposed by the Federal Reserve today represent another step in the comprehensive reform of the credit card industry that has been underway since last summer, and they are part of a larger process that puts consumers squarely in the driver's seat when it comes to their credit cards.
The issues addressed by this proposal are complicated and, despite good intentions, may mean higher prices for credit card customers, and some may see their accounts closed. We will be reviewing the proposal very carefully to discern its impact on consumers and the industry’s ability to serve them, and we look forward to submitting official comment to the Fed, raising such concerns where appropriate.
The Federal Reserve announced its proposal on credit card penalties, as required by the Credit Card Accountability Responsibility and Disclosure Act that ushered in wide-ranging reforms last month.
The Act requires the Fed to develop guidance on penalties so they aren't too onerous. One of the proposals is a ban on inactivity fees for not using your card, something issuers are already experimenting with. Another would be to require credit card issuers that raised interest rates since January of last year to re-evaluate that decision, and if appropriate, reduce the rate, the Fed said.
Other highlights from the Fed's statement:
-- A ban on penalty fees that exceed the dollar amount associated with the violation.
-- No multiple penalty fees based on a single late payment or other violation.
-- Require credit card issuers to inform consumers of the reasons behind rate increases.
These proposed provisions would take effect Aug. 22.
The CARD Act was signed into law May 2009, and the first phase took effect in August. The bulk of the reforms kicked in Feb. 22.