- Those Great New Credit Card Rules? They May Not Apply To You
In our discussions of how to borrow money during these credit-starved times, we've frequently mentioned the option of borrowing on a credit card, whether your personal one or a special small business one. We are always careful to note the chief downsides: very high rates (usually in the neighborhood of 15%, but sometimes more) as well as the potential for sudden changes. (We are also always careful to note that BizBox's sponsor is American Express OPEN.)
Given all this, we were pleased to see the Federal Reserve's announcement changing credit card rules along the lines long urged by consumer advocates. Most notably, credit card companies are now barred from raising interest rates on existing, fully paid-up balances. Additionally, card holders must now be given 45 days' notice--up from 15 days'--regarding changes such as an increase in late-payment penalties. And as for late payments: anything short of 21 days may no longer be considered "late". Basically, consumer advocates got most of what they wanted, other than timing: the rules don't go into effect until July 2010.
All sounded pretty good to us, until John Tozzi of Business Week helpfully informed us in a post that these new rules...don't apply to commercial credit cards such as small business cards. "Why the rule excludes commercial cards remains a mystery to me," Tozzi says.
Er, us too. This is quite confounding. Why does it sometimes feels like the economic powers that be are largely blind to the needs of small business people?
Somewhat bizarrely--it seems bizarre to us, anyway--the National Small Business Association glosses over this catch in its statement, which praises the changes (the only thing about them it decries is that they aren't going into effect sooner). The NSBA president's response went, “More small-business owners use credit cards as a source of financing than any other source of funding, yet 57 percent report that their credit card terms are worsening. This new rule comes at a critical time when lawmakers and regulators must do everything in their power to ensure that the driver of the U.S. economy—small business—can continue to grow and create new jobs.”
Point taken--these rules will still help many small business owners. But one gets the sense they were not done for small business owners, but rather for cardholders. So if the Fed and the Congress and the Senate and the Obama administration's Treasury Department wanted to do something for entrepreneurs on the credit card front, they could look into reforming the underwriter/issuer-merchant relationship and estabilishing a credit card bill of rights for merchants. Or, at the least, they could make it so that these swell new rules apply to commercial cards as well.
