Bill Introduced to Protect Small Biz Credit CardsJune 19, 2013
On Tuesday, June 18, Congresswoman Nita Lowey (D-N.Y.) introduced the Small Business Credit Card Act of 2013 (H.R. 2419) to further protect small-business owners’ credit cards from unfair and deceptive practices of credit card companies. Rep. Lowey has been an outspoken proponent for ending many unscrupulous practices of the credit card industry as they impact individuals and small businesses, and NSBA is a strong supporter H.R. 2419.
Congress passed in 2009 the Credit Card Accountability, Responsibility and Disclosure (CARD) Act which provided many of the safeguards sought by NSBA. Unfortunately, it failed to guarantee explicitly that the safeguards codified by the bill would apply to the cards used by America’s small-business owners. Although the credit cards of many—if not most—small business owners are based on the individual owner’s personal credit history, the cards are exempt from the Credit CARD Act due to the law amending the Truth in Lending Act (TILA), which for the most part applies only to “consumer” and not business credit cards.
Congresswoman Lowey has been outspoken on the need to extend those protections—both during the initial debate over the Credit CARD Act as well as through her recent introduction of the Small Business Credit Card Act.
Among the protections extended to business with 50 or fewer employees by the Small Business Credit Card Act:
- Require credit card companies to notify small business before raising interest rates;
- Prohibit an interest rate increase in the first year of the account;
- Eliminate unnecessary fees and interest charged on debts paid on time;
- End so-called late fee “traps” such as weekend deadlines, changing due dates, and fees for payments over the phone or online; and
- Apply payments to the balance with the higher interest rate.
While most issuers have kept their small business cards in compliance with TILA and the Credit CARD Act, there is no guarantee OR legal requirement this will continue. Thirty-one percent of respondents to NSBA’s 2012 Access to Capital Survey reported using credit cards to finance their company in the last 12 months to meet capital needs.
Furthermore, when considering that, according to the NSBA 2012 Access to Capital Survey, small business ranked credit cards second to last in terms of which lending source best serves the small business community, this legislation is of critical importance.
Please click here to view the letter of support NSBA submitted on the new legislation.