Big Day for Penalty Fees

Most of you are aware that August 22nd marks another important Regulation Z deadline.  This means you cannot charge a penalty fee greater than the amount of the underlying transaction.  What does this mean to you?  When the minimum payment on a credit card account is $15 and that account has gone delinquent, the amount of the fine cannot exceed $15 which is the amount due from the member.  We no longer have credit unions charging over-limit fees so it wasn’t necessary to make changes to that logic; nor do we have credit unions charging delinquency fines greater than $25.  In essence all CU*Answers clients have chosen the safe harbor established by the Federal Reserve.

Remember this very important point interpreted from Regulation Z by the Federal Reserve.  There are strict rules in place that prevent charging multiple fees when based upon the same transactional occurrence.  Some credit unions could charge an NSF fee on returned credit card payments and also charge a delinquency fine.  If that is your practice, I urge you to review your processes and consider the commentary made by the Federal Reserve.   My interpretation is that you can charge one fee for that one occurrence.  For example you may charge the NSF fee for a returned payment but it’s not permissible to then charge a delinquency fine in addition to that NSF fee.

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