WASHINGTON, DC – In an effort to protect consumers and prevent credit card companies from duping seniors, U.S. Senators Jack Reed (D-RI), Charles E. Schumer (D-NY), Bill Nelson (D-FL), and Robert Menendez (D-NJ) are calling on the Federal Reserve to put a stop to credit card companies’ attempts to skirt consumer protection reforms by urging families and seniors to sign up for “business” credit cards that are not covered under the new credit card reform laws, and often include potentially harmful terms. In a letter to Federal Reserve Chairman Ben Bernanke, the Senators asked the agency to take immediate steps to protect consumers by requiring business card issuers to clearly disclose the fact that the cards are intended for business purposes only and do not offer the same consumer protections as ordinary credit cards. The request comes in the wake of a recent study by The Pew Charitable Trusts which revealed that over ten million business credit cards are offered to consumers every month – the majority of which have terms that would be illegal in consumer cards.
The Senators asked the Federal Reserve to take immediate steps to protect consumers by requiring business credit card issuers, in connection with any solicitation, to clearly state that the card being offered is a business card; clearly disclose that the card may not carry all the same protections as ordinary consumer cards; and require applicants to provide a business tax identification number on the application. Such steps would greatly reduce the number of consumers who unknowingly sign up for credit cards with far fewer protections.
The Senators wrote: “While we are encouraged some banks, such as Bank of America and Capital One, have taken voluntary steps to protect consumers, we are very concerned some issuers are marketing these products to ordinary consumers who may not realize they do not offer the same protections as personal cards.”
According to a study released by the Pew Charitable Trusts last month, American households receive more than 10 million offers every month for business credit cards and the “majority of these cards have potentially harmful terms that would not be legal on those labeled for consumer use.” The study also found that between January 2006 and December 2010, Americans received over 2.6 billion business credit solicitations, comprising over 9 percent of all direct mail marketing of credit cards to U.S. households. Alarmingly, more than 6.7 million of these solicitations go to seniors every month.
The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act, passed into law in 2009, instituted a plethora of important protections for consumers. The reforms banned rate increases in the first year an account is open and, in following years, required that the card issuer provide 45 days notice before a rate increase can be assessed. The act also prevented credit card companies from raising interest rates on existing balances. These reforms, however, are not applicable to cards labeled for business or commercial use.