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Over-the-Limit Fees
The bill would require creditors to allow cardholders to establish a credit limit that cannot
be exceeded. As such, creditors would be prevented from completing any transaction that
would put the cardholder in excess of their credit limit. Under current practice, most
cardholders are allowed to exceed their credit limit and are charged a fee for doing so. Under
the bill, creditors would be prohibited from charging over-the-limit fees on accounts for
which the cardholder has requested a credit limit that cannot be exceeded. Because the bill
also would require creditors to notify their cardholders of the option to establish a credit limit
and provide the necessary tools for cardholders to do so, the Federal Reserve and industry
representatives believe that many cardholders would elect to use the option. According to
the Federal Reserve and industry sources, this requirement could significantly affect the
amount that creditors collect in fees each year. The industry currently collects billions of
dollars in such fees annually. Even if a small percentage of cardholders elected to use this
option, creditors could lose a significant amount of fees.
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