Four Senators today called for more disclosure on business credit card offers so cardholders will understand that business cards are not protected by the same laws as regular consumer cards that bar practices like retroactive interest rate hikes.
In a letter today to Fed Chairman Ben Bernanke, the four Democrats asked the Fed to "take immediate steps to protect consumers" from mistakenly believing that the more than 10 million business credit card offers that go to households each month have similar contracts as other cards. The Senators are Charles Schumer of New York, Jack Reed of Rhode Island, Bill Nelson of Florida, and Robert Menendez of New Jersey.
In addition to seeking more disclosure, the Senators ask the Fed to make business credit card issuers require business tax ID numbers from applicants to prevent non-business owners from getting the cards. Fed spokeswoman Susan Stawick declined to comment on the letter.
The Pew Safe Credit Cards Project highlighted the separate treatment of small business credit cards in a report last month. It's not a new issue, however. As far back as 2008, the Fed made rules for consumer credit cards that did not apply to business cards, even though such cards are personally guaranteed and function similarly to personal cards. When Congress passed the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act in 2009, small business cards were carved out of that as well. Business card users still got hit with penalties, such as "overlimit" fees they never opted into, that consumer cardholders were protected from.
Business-to-business transactions aren't generally covered by consumer protection laws because business owners are assumed to be sophisticated enough to do their due diligence before entering into an agreement. The Senators' letter, citing data from Pew, questions how many business card offers reach people who don't own businesses. In the last five years, they write, "Americans received over 2.6 billion business credit solicitations, comprising over 9 percent of all direct mail marketing of credit cards to U.S. households. Alarmingly, more than 6.7 million of these solicitations go to seniors every month."
Full text of the letter after the jump.
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In a letter today to Fed Chairman Ben Bernanke, the four Democrats asked the Fed to "take immediate steps to protect consumers" from mistakenly believing that the more than 10 million business credit card offers that go to households each month have similar contracts as other cards. The Senators are Charles Schumer of New York, Jack Reed of Rhode Island, Bill Nelson of Florida, and Robert Menendez of New Jersey.
In addition to seeking more disclosure, the Senators ask the Fed to make business credit card issuers require business tax ID numbers from applicants to prevent non-business owners from getting the cards. Fed spokeswoman Susan Stawick declined to comment on the letter.
The Pew Safe Credit Cards Project highlighted the separate treatment of small business credit cards in a report last month. It's not a new issue, however. As far back as 2008, the Fed made rules for consumer credit cards that did not apply to business cards, even though such cards are personally guaranteed and function similarly to personal cards. When Congress passed the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act in 2009, small business cards were carved out of that as well. Business card users still got hit with penalties, such as "overlimit" fees they never opted into, that consumer cardholders were protected from.
Business-to-business transactions aren't generally covered by consumer protection laws because business owners are assumed to be sophisticated enough to do their due diligence before entering into an agreement. The Senators' letter, citing data from Pew, questions how many business card offers reach people who don't own businesses. In the last five years, they write, "Americans received over 2.6 billion business credit solicitations, comprising over 9 percent of all direct mail marketing of credit cards to U.S. households. Alarmingly, more than 6.7 million of these solicitations go to seniors every month."
Full text of the letter after the jump.
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View the Original article
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