By Maria Valdez Haubrich
The CARD Act, enacted in 2009, added protections for consumer credit cards against unfair or deceptive business practices. Now the Pew Health Group is urging that such protection be extended to business credit cards as well, reports CNBC.
Credit cards for business or commercial use are exempt from the CARD Act. Pew’s Safe Credit Cards Project studied credit cards issued by the 12 largest credit card issuers. These companies account for some 85 percent of the 11 million small business credit cards active in the U.S.
The study, Business Credit Cards Place U.S. Households at Risk, found that while some major banks have voluntarily become more “transparent” about their business credit card practices, the majority have not. “While consumer credit cards in general no longer include unpredictable pricing structures and hair-trigger penalty interest rates, these and other potentially harmful practices remain common on business credit cards that millions of individuals use,” the report states.
Here are some findings of the study:
- 80 percent of business credit cards in the study had an “any time” change-in-terms clause with no right to opt out. In other words, card issuers can change the account terms at any time without notice. In comparison, with consumer cards, cardholders are typically able to opt out if terms are changed, and must be given 45 days’ notice before a change.
- 84 percent of business credit cards allow card issuers to apply payments to lower-rate balances first, meaning charges on higher-rate balances are maximized.
- 67 percent of business credit cards have penalty rates for going over the limit or paying late. The median annual percentage rate for penalties was 29.4 percent. The penalty rates can be applied without notice and can last indefinitely. For this to happen with consumer cards, the account must be seriously delinquent.
73 percent of business credit cards charged a late fee (in addition to the interest rate increase), and 67 percent of the cards had an overlimit fee. These fees averaged $39 each. Consumer cards have restrictions on penalty fees.
Nick Bourke, director of Pew’s Safe Credit Cards Project, is urging legislators to extend the protections of the Credit Card Act to any card where a cardholder is personally liable. If a card is not covered by the CARD Act, Pew is urging that consumers be warned of this fact.
Pew is primarily concerned with individuals who have business credit cards without being aware of the different policies. But any change to these policies would be welcome for business owners and their employees who might be harmed by onerous and unfair policies.
Image by Flickr user Shawn Rossi (Creative Commons)
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