U.S. Rep. Nita Lowey (D-NY) introduced legislation last week to protect small-business owners’ credit cards from unfair and deceptive practices of credit card companies.
The Small Business Credit Card Act (H.R. 5660) is designed to provide small-business owners the same consumer protections as individual credit card holders.
The credit cards of most small-business owners are based on the individual owner’s personal credit history, explained Lowey. Thus, those cards are exempt from the credit card reform legislation signed in 2009, which applies only to “consumer” and not business credit cards.
The Truth in Lending Act (TILA) defines a “consumer” as a “natural person who seeks or acquires goods, services, or money for personal, family, household use other than for the purchase of real property. Lowey said a small-business owner who opens a personal credit card account and uses it for business should be covered under TILA, which they are not. This leaves them unprotected from unfair and deceptive credit card practices.
According to a survey by the National Small Business Association (NSBA), 27 percent of small businesses say they cannot access adequate financing and are being pushed into using credit cards to meet capital needs. However, only 31 percent say those credit cards meet their capital needs.
The Small Business Credit Card Act would prevent credit card companies from arbitrarily raising interest rates on small businesses without proper notice; prohibit interest rate increases on existing balances; and prohibit interest charges on debt paid on time. Further, it would require any payment over the minimum apply to the balance with the highest interest rate.
The NSBA commended Lowey for sponsoring H.R. 5660.