Late Fees Drop Two Years After Credit-Card Act, Pew Study Says
Two years after credit-card legislation was signed, late payment fees have declined and interest rates have stabilized, the Pew Charitable Trusts said.
Charges for late payments on U.S. bank-issued credit cards decreased to a range of $25 to $35 from a median of $39, according to the report released today by the Philadelphia-based nonprofit. The study looked at about 300 consumer credit cards offered online by the 12 largest banks and credit unions, and compared terms for cards offered in March 2010 and January 2011. Late fees were as common as they were in 2010, the study said.
The Federal Reserve approved rules that took effect in August prohibiting card issuers in most cases from charging first-time offenders more than $25 for paying their bills late. The Fed set a maximum fee of $35 for additional late payments within six months of the first delayed payment.
“Pew’s research shows that predictions that the legislation would spark new charges and long-term interest rate growth have not materialized,” Nick Bourke, director of Pew’s Safe Credit Cards Project, which began studying how the industry treats consumers in 2007, said in a statement.
The median highest advertised interest rate for credit cards issued by banks was unchanged at 20.99 percent and the lowest also stayed the same at 12.99 percent, the report said. The average rate on existing credit-card balances fell to 13.44 percent in February from 14.67 percent a year earlier, Federal Reserve data show.
Annual fees stayed at a median of $59 for bank-issued cards, the Pew study said. The percentage of bank credit cards with annual fees increased to 21 percent from 14 percent.
U.S. revolving debt, which includes credit cards, increased $1.9 billion in March, the second gain in four months, the Fed said May 6.
President Barack Obama signed the Credit Card Accountability Responsibility and Disclosure Act on May 22, 2009, calling the rules limiting fees and abrupt contract rate changes “common sense reforms, designed to protect consumers.” The provisions were phased in, with most taking effect Feb. 22, 2010, including prohibitions on interest-rate increases in most cases during the first year an account is opened.
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