New credit card rules mandated by the Credit Card Accountability and Responsibility and Disclosure Act of 2009 enacted robust consumer protections. But so-called “professional cards” aren’t covered by the CARD Act. Professional cards are immune from consumer protections such as limits on excessive late fees and surprise interest rate hikes. With billions of dollars in late fees and interest payments at stake, credit card companies are trying to convince ordinary consumers that they need a professional credit card, small business credit card or corporate credit card.
Professional cards not protected by CARD Act
Professional credit cards used to be reserved for small business owners or corporate executives. But the Wall Street Journal reports that since the CARD Act was passed in March 2009, credit card companies have been pushing professional cards to people who don’t need them. In an effort to dodge the consumer protections provided by new credit card rules, credit card companies are swamping ordinary consumers with credit card applications. According to the research firm Synovate, 47 million professional credit card offers were mailed in the first quarter of 2010–a 256 percent increase from the same period the year before.
Professional cards set a trap for consumers
Before consumers apply for a professional card, small business credit card or corporate card, they should be aware of several credit risks. Credit Loan reports that banks will apply any payment made over the minimum to the lowest interest balance. This means the higher interest balance is compounding interest until the lower interest balance is paid off. Professional credit cards don’t have to allow 21 days between the date a statement is mailed and the date payment is due, making late payments and late payment penalties more likely. Interest rates can also rise significantly without notice if a payment is made just one day late. Finally, professional credit cards can change interest rates, transaction fees, annual fees and penalty fees terms without any advance notice.
Extending CARD Act protections to small business
New credit card rules don’t apply to professional cards because small businesses get shafted by Congress when it passes laws to protect consumers, according to Bob Sullivan at MSNBC. Sullivan writes that small retailers, for example, suffer the most from credit card fraud. Most consumers who enjoy strong liability protection from credit card fraud aren’t aware that businesses accepting credit cards are often left holding the bag when criminals use stolen cards. Now that a different set of rules for professional cards is being exploited by credit card companies to bait consumers, Sullivan suggests that extending the same protections in the CARD Act to businesses would benefit everyone.