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Fed Misses Deadline for Small Biz Credit Card Report

Posted by: John Tozzi on May 25, 2010

The credit card reform that Congress passed last year to protect consumers from practices like retroactive interest rate hikes did not cover small business credit cards. The law did direct the Federal Reserve Board to study the use of credit cards by small businesses and report back to Congress on whether further action is needed, giving the board 12 months to do so. The Fed missed that deadline over the weekend.

Fed spokeswoman Susan Stawick told me that the report, due May 22, had not been sent to Congress yet. She would not comment on whether it was completed or when it might be delivered to lawmakers. The Fed expects to send the report to the House Financial Services Committee by the end of this week, according to a spokesman for the committee.

Congress instructed the Fed to probe whether small businesses are adequately protected from unfair or deceptive practices by credit card issuers and whether terms and fees are appropriately disclosed, among other things. Since small business credit cards are now regulated by a separate set of rules than consumer cards, business owners are left to navigate a patchwork of protections depending on what type of credit cards they use — and many mingle both personal and business cards.

Small business payment cards (debit and credit) account for 15 percent of total card purchases, estimates Ken Paterson, analyst at research firm Mercator Advisory Group. For now, that segment of the market doesn’t get the same protections consumers do — like no over-limit fees without explicitly opting in, no double-cycle billing, and no interest rate hikes on existing balances. (Some banks have voluntarily given some protections to business card holders.)

Banks say restrictions limit the availability of credit and increase the cost—and borrowers may begin to see annual fees or less generous rewards. (Interest rates on small business cards have already gone up.)

Lawmakers may not be convinced. Congress is already weighing other restrictions on credit card issuers, including limiting swipe fees on debit cards. If the Fed report says small business cards should get the same protections consumers have, it could indicate further regulation is on the way.

Reader Comments


May 27, 2010 7:46 PM

My small business (established in 1984)is having an issue with our current business credit card company. We have had this business credit card for well over 12 years and have always made our payments (larger than the minimum) and before the due date. Recently we received a notice that our card limit had been raised another $13,000.00 and that was a nice compliment. Then early this week my husband (co-owner of our company) made a purchase of $12.78 and presented our business card only to find out it had been canceled along with our personal credit card as well. Both cards are with the same bank. We have excellent credit and take pride in that fact. When my husband called the bank they said that our debt radio was not in line with their guidelines. They made no appology and gave no notice to us, previous to this occurance. Both of us are furious and intend to pay off these cards, cancel them, by our request and tell our story to any and all. Word of mouth about any company spreads faster than any advertising.


May 28, 2010 11:52 AM

Please continue to fight this injustice. I am sick of the bull that banks are getting away with. I am a small business owner also and haven't experienced this yet but would love to know who the credit card company is so I will not do business with them now or in the future

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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