New Fed credit card rule doesn't apply to small business cards

The Fed adopted new rules yesterday that would crack down on some practices by credit card companies in an attempt to make credit card agreements fairer and more transparent. Issuers won’t be able to raise interest rates on existing balances or apply payments to the portion of the balance carried at the lowest interest rate, and they’ll have to give 45 days notice when changing terms (instead of the current 15). The changes take effect July 1, 2010. (More details in the Fed press release.)

Big catch: the rule change does not apply to small business cards. So if you have a commercial card, it will still be subject to the old rules. Even though many small business credit cards function exactly like personal credit cards, and many people (especially self-employed or those in non-incorporated businesses) use them interchangeably.

Many small business owners also use personal credit cards for business needs, and they’ll benefit from this change. The National Small Business Association, which has been an aggressive advocate for strengthening credit card regulations, praised the rule change in a statement:

Although NSBA is disappointed that the rule will not go into effect until July 2010, it is gratifying that federal regulators recognize that small business owners need more than just increased disclosure, and are—for the first time—exercising their ‘unfairness’ authority to address a host of practices that defy free-market capitalism.

There’s clearly a lot of interest among consumers and advocates in changing how credit card issuers do business. The Fed got more than 60,000 comments on the rule change when it was proposed in May, more than it ever got on any other issue. Why the rule excludes commercial cards remains a mystery to me.

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