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The Federal Reserve Board capped late fees on credit card payments.
Consumers that make a late credit card payment are often hit with a big fine and penalty fees, among other things.

But that, according to the Federal Reserve Board, will no longer be legal. The board approved the final rule to protect credit card users from high fees, including those that would exceed the value of the minimum payment.

Regulation Z, which governs “Truth in Lending,” will now prevent credit card companies from charging late fees of more than $25 unless the customer has made repeated violations, the Federal Reserve said. In addition, lenders can no longer charge fees that exceed the dollar amount associated with the violation. For instance, companies can no longer charge a $39 fee when a consumer misses a payment with a minimum of $20.

The regulation also bans inactivity fees that would punish customers for not simply using the card to make new purchases, and prevents issuers from charging multiple penalties for one late payment or other violation, the Federal Reserve said. It also requires issuers that have increased their rates since January 1, 2009 to evaluate if the reasons for such increases have changed, and, if so, reduce them.

A Washington Post report on the new regulation said that these changes were designed to comply with the credit card reform passed last spring, and that these new rules take effect on August 22.

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