Small business credit cards not protected by CARD Act

By Guest Contributor
May 27, 2011

– Robin Enos is a contributor to FindLaw’s Free Enterprise blog. FindLaw is a Thomson Reuters publication. This article originally appeared here. –

The Credit Card Accountability Responsibility and Disclosure Act of 2009 (the “CARD Act”) went into effect on March 22, 2009, but Congress exempted business credit cards.

This new consumer protection law changed the game for credit card companies and consumers, as we blogged about in 2009.

So two years into application of the new law, business credit card users remain at risk for many of the dangers Congress targeted with the CARD Act, reports the Pew Charitable Trust.

Consumers no longer risk exposure to two-cycle billing, unilateral APR increases, and certain fees. But since business cards lack these protections, and many business cards are still backed by their holders’ personal credit, credit card companies have kept a “back door” open to the old practices.

And business credit card holders most at risk are small business owners, reports the Pew Charitable Trust.

Many credit card companies make small business owners guarantee business cards with personal credit. Thus, the business owner remains responsible if the company goes out of business. This liability tail carries particular danger for business owners who issue business credit cards to employees.

So why don’t small business owners simply use their personal credit cards for business? Wouldn’t they keep their CARD Act protections against APR increases, billing games and arbitrary late fees?

Yes, but charges to a consumer card used in business might be harder to qualify as business tax deductions. Interest charged to consumer accounts might not qualify as a business expense.

And many business credit cards still have the old arbitrary rules and fees. Pew’s findings:

  • 80 percent of business cards include an “any time” change in terms clause
  • 84 percent of business cards empower card companies to apply payments to low-rate balances first
  • 67 percent of business cards include penalty rates for late payments, contrary to CARD Act protections
  • Penalty fees are virtually unrestricted on business credit cards

Business credit cards keep coming in the mail to small business owners. But these cards do not carry any of the CARD Act protections. Congress, by leaving business credit card practices untouched, has left the small business owner out in a cold wind.

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How can a small business owner get his name off the credit card responsibility? Is it as simple as asking the merchant (visa, mastercard), to room them from personal responsibility?

Posted by jimfrancis | Report as abusive