House Passes Credit Card Reform, But Leaves Out Small Business Cards

The House just passed the Credit Cardholders Bill of Rights, which restricts some aggressive tactics by credit card companies, like arbitrary rate changes, applying payments in a way that maximizes interest charges, and double-cycle billing. But the bill as written doesn’t apply to small business credit cards, even though such cards are personally guaranteed and function exactly the same way consumer credit cards do. An amendment that would have made this change explicitly apply to cards issued to businesses with fewer than 500 employees did not make it out of committee yesterday.

It’s not clear why, but the same thing happened with the Fed limits on credit cards passed last year. The Senate still has to take up this bill, but President Obama has strongly backed it and the House passed it easily, so it has a good shot at becoming law. I suppose there might be wiggle room to add the small business provisions in the Senate version.

But if the House version passed today becomes law, credit card companies will have a loophole to subject small business customers to the tactics that ordinary consumers will be protected from. Of course, small business owners could just opt to use personal cards in their own name instead of small business credit cards, since they’re essentially the same. But those who do use small business credit cards should realize the new protections won’t apply to them.

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