With nearly one-third of small businesses financing company operations off credit cards, federal legislation was introduced today to prevent bait-and-switch interest rates.
U.S. Rep Nita Lowey, D-Westchester/Rockland and the senior Democrat on the House Appropriations Committee, was expected at noon to introduce the Small Business Credit Card Act, which would extend consumer protections currently on the books for individuals to business with 50 or fewer employees.
The proposed law would require credit card companies to notify small business before raising interest rates.
The law would also prohibit an interest rate increase in the first year of the account; eliminate unnecessary fees and interest charged on debts paid on time; end late fee “traps” such as weekend deadlines and changing due dates and fees.
Additionally, if it becomes law, payments cannot shunt unpaid balances into higher-interest accounts.
“While 31 percent of small businesses rely on credit cards to finance their operations, small business credit cards are currently exempt from consumer protections provided under legislation passed in 2010,” Lowey said in a prepared statement prior to unveiling the legislation. “A recent survey of small business owners found that nearly one in two have experienced a deterioration of credit card terms, including increased interest rates, fees and payment procedures.”
The Credit Card Accountability, Responsibility and Disclosure (CARD) Act became law in 2010, Lowey reported. It protects individual consumers from a range of unfair and deceptive practices. Lowey said this bill will extend those same protections to business with 50 or fewer employees.
