New limits placed on credit card late fees and other penalties

The Federal Reserve approved a series of new limits on credit card companies that will protect consumers from exorbitant late fees and other penalties, including fees for inactivity and exceeding the maximum credit limit.

The new limits take effect Aug. 22 and are the final step in the Fed's action to implement the Credit Card Accountability and Disclosure Act that Congress enacted last year. That legislation has already benefited consumers and brought a number of restrictions on credit card companies' billing practices, including curbs on arbitrary interest rate increases.

The additional limits announced Tuesday mostly target payment penalties. Now, credit card issuers can only charge a maximum fee of $25 if a consumer pays late (as long as they haven't been late in the past seven months). The new rules also bar credit card companies from charging "inactivity" fees and places new limitations on the fees that they can charge for other violations such as returned checks or exceeding account's maximum credit limit.