Credit Card Companies Find A Way Around The Credit Card Accountability Act

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The Wall Street Journal has posted an article about the unexpected dangers of “professional” credit cards, which are typically used by small businesses or corporations. It’s a little known fact that professional cards aren’t covered under the Credit Card Accountability and Responsibility and Disclosure Act of 2009. The Card Act bars billing practices such as the raising of interest rates at random, inactivity fees and shortened billing cycles.

Professional cards used to only be used by corporate executives and small business owners, but then the Card Act passed in March 2009. Since then, credit card companies have been sending professional card offers and applications to normal consumers. The research firm Synovate found that there was a 256% increase, about 47 million, in professional card offers that were sent out in the first quarter of this year. The Card Act has drastically cut banks’ profits and they are attempting to regain some of that loss by bribing consumers with professional cards, and thus bypassing the regulations of the Card Act.

While the Card Act bars issuers from raising rates on existing balances unless a cardholder is at least 60 days late with a payment, there isn’t any such prohibition on the Ink From Chase card, one of several business cards offered by the bank. The card agreement says Chase is free to implement a default rate of 29.99% if a customer is late by just one day on a payment.

Chase’s Ms. Rossi says its small-business credit cards have “added benefits and features designed specifically for small-business owners.”

Holders of Capital One Financial’s Business Platinum Card, meanwhile, can see their low introductory interest rates spike if they are just three days late with payment twice in a 12-month period, far less than the 60-day notice period required under the Card Act.

Credit card companies have also simplified their applications for professional cards. For example, in January, Chase sent out applications for their Ink From Chase Cash Business Card that required information such as the name of the cardholder’s company, type of business, federal employer ID number, and address. On the July applications there was just a box to check that said Yes, I am a business owner” or “Yes, I am a business professional with business expenses.”

Some consumer advocates say the increased mailings, coupled with offers requiring only minimal business information, will lead to more customers ending up unprotected and unaware. “A lot of consumers really don’t know the difference, and some of the wording on the offers can be ambiguous,” says Beverly Harzog of Cardratings.com, a consumer-education website.

Most consumers don’t realize that professional cards aren’t covered by the Card Act until they don’t get the full 21 days between when the statement was mailed and the payment due date. Despite the significant differences, credit card companies still pitch professional cards as normal credit cards.

If you have had problems with credit card companies and have further questions and concerns, feel free to contact us through our website or by calling 205-879-2447.

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