How does the credit practices rule define pyramiding of late charges?

The definition of pyramiding of late charges under the credit practices rule refers to the application of multiple fees based on a single late payment. This means that if a borrower incurs a late payment, the lender may not impose more than one late fee for that single occurrence. Pyramiding occurs when a lender continues to charge additional fees for the same late payment, leading to an accumulation of charges that can significantly increase the borrower’s financial burden.

This practice is prohibited in many consumer protection laws, as it can lead to an unfair accumulation of costs that may not be justified by the borrower's actions. By limiting the fees to one per late payment, the rules help to ensure fairness and transparency in lending practices, allowing borrowers to manage their financial obligations without being penalized multiple times for a single missed payment.

The other options do not accurately describe pyramiding of late charges. For example, assessing late charges for each missed payment does not reflect the concept of pyramiding since it pertains to distinct occurrences rather than charging multiple fees for one missed payment. Similarly, collecting interest on late charges, while potentially problematic under certain regulations, does not specifically relate to the concept of pyramiding. Finally, charging fees for reinstating a loan involves a different aspect of lending practices and does