After the disastrous financial meltdown of 2008, the federal government passed the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) to limit credit card companies from doing things like jacking up customers’ rates with no warning and then slamming them with huge penalty fees if they couldn’t make their new payments. By most accounts, although not perfect, the law has achieved its objectives. The newly created Consumer Financial Protection Bureau (CFPB) calculates that Americans paid $1.5 billion less in late fees and $2.5 billion less in overlimit fees following the passage of the CARD Act.
The CFPB was created to give consumers information they need to understand various terms of consumer agreements entered into with financial companies. The CFPB also works to make regulations and guidance as clear and streamlined as possible so providers of consumer financial products and services can follow the rules on their own. Among other things, the CFPB is required to :
Unfortunately for many, neither the CARD Act nor the CFPB is focused on helping out small business owners. Importantly, the CARD Act doesn’t cover business credit cards. Many industry watchdogs believe that certain credit card companies are taking advantage of a CARD loophole by adding terms and conditions it wouldn’t be able to get away with in a consumer cardholder agreement. For example, one card company can still raise cardholders’ interest rates whenever and by however much it wants, and cardholders who don’t make the payments can get hit with a 30 percent penalty APR.
Another insidious practice that is often criticized is a situation where a cardholder has two different APRs on the same card. It is policy for this particular card company to not allow the small business to pay down the higher-rate balance until they’ve finished paying off whatever they owe at the lower rate, which virtually guarantees a longer period of indebtedness.
At a time when the country is relying more and more on small businesses, something should be done in Congress to extend the protections of the CARD Act to all those that need it. Protecting consumers was a great first step, but if a practice is “predatory” it shouldn’t be allowed on any entity, consumer or otherwise. If you need more information on this subject, contact Roman Shaul, a lawyer in our Consumer Fraud Section, at 800-898-2034 or by email at Roman.Shaul@beasleyallen.com.
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