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June 15, 2011

  • News:  Senators Seek Business Card Protections 

    Small business owners were caught by surprise when they discovered that legislation aimed at eliminating the unfair and abusive practices against credit card customers did not provide business cardholders with the same protections. After the enactment of the CARD Act 2009, lenders quickly acted on this loophole to step up efforts to increase fees on business credit cards to generate profits lost by the law. Lenders have also used the loophole to market so called "business" cards to any individual under false pretenses. With any luck, small business owners and other individuals who have found themselves in the middle of these latest efforts by lenders to profit from their mis-fortunes, a number of United States senators have joined efforts to push federal regulators to put a halt to abusive practices against business credit cardholders.

    A Pew Charitable Trusts study found that more than 10 million business credit cards are marketed in the U.S. each month. These staggering numbers have motivated Senators Charles Schumer (D- NY), Jack Reed (D-RI), Bill Nelson (D-FL), and Robert Menendez (D-NJ) to solicit the Federal Reserve to compel banks and credit card companies to disclose to all business cardholders that the CARD Act 2009 does not provide them the same protections as consumer cards. In a recent letter to Ben Bernanke, Federal Reserve Chairman, the team stated that lenders are marketing business cards to individuals under false pretenses. They added that lenders are failing to inform cardholders that they are not protected under the 2009 legislation. It was also noted that only two major banks, Bank of American and Capital One, have voluntarily taken steps to ensure that business card applicants are made aware of the issue.

    After finding that business credit card offers to American households increased to over 23 percent of the total cards marketed in 2009 the year that new card reform was enacted. The Pew report does note that a drop in consumer card marketing could have added to the increase. Nick Bourke, Director of Pew's cards project, believes that U.S. lawmakers need to extend the legislation's protections to include business cards. Pew's conclusions were drawn from the disclosures of the top 12 U.S. card issuers.

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