Credit/Debit Cards, Regulation

CFPB raises CARD Act penalty fee safe harbor, HOEPA fee trigger

cfpbThe CFPB published a final rule last month raising the safe harbor for credit card penalty fees under the CARD Act and Home Ownership and Equity Protection Act.

Under the final rule, which took effect at the beginning of the year, the minimum interest charge disclosure thresholds are unchanged, but the 2014 safe harbor for first-time credit card fees is $26 and $37 for each subsequent violation.

The CARD Act requires that credit card bills be due on the same date each month and that issuers generally cannot charge a late fee without 21 days notice. The legislation also prohibits issuers from charging penalty fees higher than the dollar amount associated with the violation, ensuring that penalty and late fees are “reasonable and proportional to the violation of the account terms.”

Previously, penalty fees were set at $25 for the first violation and $35 for each susequent violation within the next six billing cycles.

The CFPB also adjusted the dollar amount that triggers additional consumer protections for certain mortgages under HOEPA. Reflecting changes in the Consumer Price Index, the CFPB adjusted the fee trigger for HOEPA loans to $632. The trigger was previously set at $625.

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