Alert April 02, 2013

CFPB Amends Rule on Credit Card Fees

The CFPB released its final rule amending Regulation Z and settling a controversy that arose in 2011 after the FRB issued a rule implementing the Credit Card Accountability Responsibility and Disclosure Act of 2009 . The CARD Act places restrictions on credit card fees by capping the aggregate amount of certain fees that can be charged during the first year following the opening of an account to 25% of the account’s authorized credit limit at the time of opening. The FRB’s rule extended this limitation to cover fees charged prior to the opening of an account, such as application fees. In July 2011, a credit card issuer challenged the FRB’s rule in federal court alleging that the FRB exceeded its authority by expanding Regulation Z to apply to fees the consumer is required to pay prior to account opening—rather than the first year of the account as required by the CARD Act. The federal court granted a motion for a preliminary injunction preventing the FRB’s rule from taking effect. "To resolve the uncertainty caused by the…litigation," the CFPB issued a proposal in April 2012 to amend the FRB rule to limit the credit card fee restrictions to apply only to fees assessed during the first year after opening of an account (see April 17, 2012 Alert). The final rule adopts the 2012 proposal and became effective March 28, 2013.