What is a penalty APR?
A penalty APR (or Annual Percentage Rate) is an interest rate charged when a consumer fails to make payments on time or violates any other credit card terms or agreements. The penalty APR is usually much higher than the regular APR. In Florida, credit card laws dictate that penalty APRs cannot exceed 25% unless the consumer misses two or more consecutive payments in a 12-month period. Additionally, the credit card issuer must provide an explanation of why the penalty APR is being imposed and must give the consumer at least 45 days’ notice before increasing the APR. This gives the consumer time to make arrangements to bring the account current. The credit card issuer must also give the consumer the option of transitioning back to the lower APR once they have paid the delinquent amount and then maintained a consistent payment schedule for six months. It is important to note that credit card issuers in Florida are not allowed to increase the penalty APR retroactively. This means that the credit card issuer cannot increase the penalty APR for payments already made before the 45-day notice period. In summary, a penalty APR is an interest rate charged to consumers who have failed to make payments on time or have violated any other credit card terms or agreements. In Florida, the penalty APR is limited to 25% unless the consumer has missed two or more consecutive payments in a 12-month period. Credit card issuers are also required to provide an explanation and 45 days’ notice before increasing the APR.
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