Lawmaker Seeks New Credit Card Protections for Small Businesses

May 4, 2018

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A New York congresswoman has introduced legislation to expand consumer credit card protections to small business credit cards.

Widespread protections adopted by the Credit CARD Act of 2009 that, among other things, placed restrictions on when issuers can increase cardholders’ interest rates, do not apply to business credit cards.

The legislation sponsored by US Rep. Nita Lowey (D-NY) would, according to

  • prevent issuers from raising interest rates on small businesses without proper notice
  • prohibit interest rate increases on existing balances
  • prohibit interest charges on debt paid on time
  • require any payment over the minimum apply to the balance with the highest interest rate.

The bill was introduced in the House of Representatives on April 27. Lowey previously introduced similar legislation — called the Small Business Credit Card Act of 2013 — but it never received a committee vote, meaning the full House never took up the legislation.

What the CARD Act Changed

The landmark Credit Card Accountability Responsibility and Disclosure Act of 2009 fundamentally changed the relationship between issuer and cardholder. Its key highlights include:

  • Banning retroactive interest rate hikes on existing balances with three exceptions — at the expiration of a promotional period, if the cardholder makes a late payment or if the card’s rate is variable. Issuers must give 45 days’ notice before hiking rates. Low intro rates must apply for at least six months.
  • Giving consumers adequate time to pay. Consumers have at least 21 days to pay from the time the bill is mailed.
  • Requiring card companies to apply payments to a consumer’s highest interest rate balances first. This would come into play, for example, if a consumer had both a low-interest balance transfer and also made purchases on the card when the regular APR applied.

Most credit card issuers have voluntarily added at least some of the CARD Act’s protections to small business cards, a recent WalletHub survey found. But Bank of America and TD Bank are the only issuers to have extended all of the key provisions.

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