September 08, 2010
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News: Schumer Protests Lenders' Dirty Trick
Unlike the nation's consumer credit cardholder, small business cardholders have not received the same rewards from the Credit Card Accountability, Responsibility and Disclosure Act (CARD Act 2009). In fact, the business cardholder has been completely eliminated from the legislation. As a result, lenders have continued to impose high interest rates and unfair penalties. A recent study conducted by BillShrink.com, indicates that lenders have increased small business credit card interest rates six times faster than consumer cards. The average small business card is 13.7 percent higher in April than in October 2009. On the other hand, consumer cards have only increased on the average by 2.4 percent higher.
Because of the new legislation, credit card companies are forced to find new ways to generate lost income. The elimination of the business cards from the act makes them a target. At least it had been expected that they would become the target. However, lately there have some major credit card companies that have targeted consumers with good credit scores by sending business card offers to regular consumers; in some cases, these consumers are even retired individuals. One New York senator has a warning for lenders participating in these new tactics; and by taking his concerns to the Federal Reserve. Senator Charles Schumer wrote a letter to the Fed Board Chairman Ben Bernanke asking for consumer protection against the latest predatory activity by lenders.
In Schumer's letter, he states that this latest ploy of the credit card companies clearly falls within the deceptive marketing category and that it is nothing more than a "dirty trick" designed at dodging the law. The CARD Act prohibits lenders from increasing interest rates. Some lenders have used the loophole that the legislation doesn't include the business card category and so they can issue business cards to consumers allowing them to raise interest rates at will. For the time being, the best that can be done is to warn all consumers to look over those card offers you receive in the mail to ensure it is not a business card that would throw your protections out the window.