Small Businesses May Soon See Some Credit Card Protection

When the Credit CARD (Card Accountability, Responsibility and Disclosure) Act was signed into law last May, one particularly glaring omission was made. While the Credit CARD Act carried numerous provisions for the protection of private credit card holders, it held no protection at all for small businesses using credit cards.

Small business who are using credit cards are just as vulnerable to random interest rate increases, unfair fees and other questionable credit card industry practices as any regular credit card holder. As a matter of fact, when the economic crisis hit, a lot of small businesses found themselves leaning on their credit cards to keep their businesses afloat. This further increased their exposure to the questionable practices of credit card companies. Many small businesses had hoped that they would be included in the provisions of the Credit CARD Act. They were not.

Fortunately, congress may soon be considering some credit card protection measures for small businesses come this fall. Dubbed the Small Business Credit Card Act of 2009, the drafters of the provision are aiming to extend the protection being offered by the Credit Cardholders Bill of Rights to small businesses, specifically businesses with 50 employees or less.

The Small Business Credit Card Act of 2009 will try to amend the Truth in Lending Act to include some forms of protection for small businesses against unfair credit card industry practices such as arbitrary changes in billing due dates, unannounced or retroactive interest rate increases and the notorious doubly-cycle billing. The Act also aims to provide measures allowing small business to opt out of any credit card agreement changes such as increases in credit card interest rates, allowing small business to maintain their current interest rates.

The Small Business Credit Card Act of 2009, which is HR 3457 in the House, was first introduced by Representative Neil Abercrombie of Hawaii and three other members of the House last July 31, 2009. An accompanying bill is also at the Senate.

The language in HR 3457 contends that, because of the current economic slow down, small businesses have had to forgo traditional means of raising funds for their operations and are increasingly using their credit cards for capital. Reports from the National Federation of Independent Businesses and National Small Business Association support this. According to them, 44% of small businesses are turning to their credit cards for supplies and inventory purchases and other financial needs. The report also shows that almost one third of these businesses have had their credit card limits cut this year. Also, one third of of these businesses have a monthly balance at or exceeding $10,000.