Credit Card Late Fees Up Sharply Since ’95

Penalties for late credit card payments in the United States have more than doubled in a decade, but disclosures of such fees are written in language too complicated for many consumers to understand, a government report said Wednesday.

The General Accountability Office, the investigative arm of Congress, said in its report that the average penalty in 2005 for making a late credit card payment was $34, a 162% increase from $13 in 1995.

The highest late fee was $39. Last year, more than a third of active U.S. accounts were assessed a late fee at least once, the report said.

Cardholders also could be charged a higher interest rate -- sometimes more than 30% -- as a penalty for riskier payment behavior, the office said.

The report said fees for going over a credit limit had also more than doubled, to about $31 in 2005 from $13 in 1995.

Credit card companies should “clean up their act and eliminate unfair, excessive and hidden charges,” said Sen. Carl Levin (D-Mich.), who requested the report.

Levin complained that some banks were charging a $15 fee to pay a credit card bill over the phone before the late fee kicked in. “Charging families money to pay their bill -- that’s outrageous,” he said.

The report also said, “Although penalty interest and fees have likely increased as a portion of issuer revenues, the largest issuers have not experienced greatly increased profitability over the last 20 years.”

The report examined 28 cards issued by the six largest issuers in 2004: Citibank, Chase Bank USA, Bank of America Corp., MBNA America Bank, Capital One Bank and Discover Financial Services. Their accounts make up 80% of credit card lending in the U.S., where there are more than 691 million cards.

There was no immediate comment directly from the issuers. But the American Bankers Assn., which represents banks and credit card issuers, said fees were determined based on the complexity of the different types of credit cards and risks associated with the cardholder.

Association spokeswoman Tracey Mills said some cards had “bells and whistles” that could result in higher fees if payments were late and that fees and rates varied.

The accountability office said consumers needed clearer disclosures of these penalties.