Reading the Fine Print
In May of last year, President Obama signed into law the CARD Act, which restricts some of the more abusive practices of credit card accounts, such as retroactive rate increases on outstanding balances. Unfortunately, despite the heroic efforts of Senators Landrieu and Snowe, the protections are limited to individual consumers and do not extend to small businesses. The bank lobby argued against extending protections to small businesses, claiming that such action may limit the availability of capital for revolving loans on credit card accounts and may result in higher interest rate charges. Of course, small businesses are already experiencing lack of access to credit and high charges, so if you accept the banks’ argument at face value, there was nothing to lose by extending the CARD Act to include small businesses.
As a concession of sorts, the Senate, in quashing the attempt to include small businesses in the CARD legislation, directed the Federal Reserve Bank to conduct a study of credit card use by small businesses. The Fed has just released the study, smallbusinesscredit click to download it. The Fed’s report does confirm the positions taken by small business advocacy groups as to the extensive use of credit cards by small business owners for working capital needs. It also highlights the benefits of improved disclosure requirements. However, it stops short of offering specific recommendations to protect small business credit card accounts from deceptive practices by the issuing banks. The good news is that the Small Business Credit Card Act of 2009 (H.R. 3457) is working its way through Congress. Add your voice to the fifteen national business and consumer organizations that have endorsed this legislation. Write to your senator and congressman and urge his support of this legislation at a critical time when small businesses need transparent terms on their credit card accounts.