At many small businesses the founder, president, file clerk and janitor are the same person. The vast majority—83%—of small businesses use a business credit card, according to the Federal Reserve. And because those cards aren’t subject to the same consumer protections as regular credit cards, banks began marketing them heavily in recent years, as we reported here.
So some members of Congress believe that credit cards marketed to small businesses should have the same protections as cards for individuals. Congresswoman Nita Lowey (R—NY) recently introduced a bill that would force banks to follow similar rules when they sell cards to small companies as they do for people.
[Related article: Business Credit Cards: Are They Worth It?]
“Protecting these businesses from unfair and deceptive billing practices by credit card companies—as we do already for individual consumers—is the least we can do to help small businesses grow, expand, and hire,” Lowey said in a press release.
The Credit Card Accountability Responsibility and Disclosure (CARD) Act, passed by Congress in 2009, bars banks from arbitrarily raising interest rates, and from hiking interest on existing balances or without prior notice. It also requires banks to automatically apply any payment above the minimum balance due to the highest interest balance first.
Lowey’s bill includes the same provisions. She announced the bill’s introduction surrounded by several business owners from her district. Irwin Katz owns Helicon Records in White Plains, NY. Recently his credit card company hiked his interest rate on his business card from 15% to 29% without any notice, Katz said in a press release, despite the fact that he always made his payments on time.
“It is imperative that small businesses are protected from the unfair practices of banks, which increase interest rates on credit cards without notice,” Katz said.