Four Democratic senators approached the Federal Reserve on Tuesday to request that the Reserve crack down on credit card companies attempting to circumvent consumer protection laws by marketing credit cards designed for business use to individuals. Sens. Charles Schumer (N.Y.), Jack Reed (R.I.), Bill Nelson (Fla.) and Robert Menendez (N.J.) co-signed and sent a letter directly to Federal Reserve Chairman Ben Bernanke regarding the matter.
Congress imposed new consumer protections to consumer credit cards when it passed the Credit Card Accountability, Responsibility and Disclosure Act (CARD Act) in 2009. The law required that credit card companies give consumers advance notice of increase in interest rates or fees and capped the amount of fees a card could accumulate, among other things. According to the senators these laws have been effective because rather than adhere to the rules credit card companies have simply begun selling business cards to consumers and not informing them that consumer protections do not apply to those cards.
To bring credence to their allegations the senators cited a recent study done by the Pew Charitable Trusts that found that American households receive over 10 million offers a month for business credit cards, and that the "majority of these cards have potentially harmful terms that would not be legal on those labeled for consumer use."
To combat the problem the senators have asked the Federal Reserve to require business card issuers to clearly state that they are selling business cards, explain the risks contained therein, and ensure that they are actually being issues to businesses and not regular consumers.
It is unclear at this time what stance the Federal Reserve will take on the issue.
As always, stay tuned to Credit Cards Professor for more credit card news and updates.
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