May 13, 2009
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News: Small Business CC Amendment Proposed
In the haste of getting credit card reform quickly passed through the House and Senate, it suddenly became apparent the legislation did not make provisions for small business credit card accounts. Ironically, most of these small business owners are some of the same consumers that have been experiencing the wrath of credit card companies. To the credit of the U.S. Senate Committee on Small Business and Entrepreneurship Chair Mary Landrieu, (D-LA), and Ranking Member Olympia J. Snowe, (R-ME), an amendment to the CC Act of 2009 was proposed Thursday that would include protection for small business cardholders. Additionally, the amendment would expand the Truth in Lending Act. The provision would include small businesses with 50 or less employees and would raise the credit limit from $25,000 to $50,000. The increase is warranted due to inflation and the increasing trend for small business to carry higher credit limits.
At one time, small businesses negotiated loans to raise capital; however, they have come to rely on credit cards as their major source of financing. The recession and current lending crisis has made it very difficult for small business owners to continue funding their business. The National Small Business Association (NSBA) reported that the number of small businesses who use credit cards as a source of financing has increased 18% in less than a year. Estimates on the number of small businesses who fund most of their business expense with cards is guesstimated at over 50% and could be as high as 85%. Lawmakers have received massive numbers of complaints from small business owners that lenders have been arbitrarily raising interest rates and slashing credit limits on their cards. The consequences are threatening to put many of them out of business.
The amendment is aimed at protecting the credit card accounts of small businesses in order to prevent layoffs and stimulate growth. Proponents say the amendment addresses critical deficiencies in the act which are needed to ensure adequate safeguards to protect job creators. A long list of impressive supporters of the amendment have signed a letter of support and will be watching the matter closely.