From January 2006 to December 2010, American households received more than 2.6 billion offers for so-called "business" credit cards, according to a new report from the Pew Safe Credit Cards Project. The cards look, feel, and perform just like consumer credit cards but for one small-but-critical detail: They don't have to conform to basic consumer protections - including the new safeguards of 2009's Credit Card Accountability Responsibility and Disclosure Act.
You don't have to be a businessperson have one of these cards, which Pew says are "labeled for business or commercial use, regardless of whether the account holder is a large corporation, a small business owner, an employee or an ordinary consumer." You might have one in your wallet today.
Why does it matter? You can read the Pew report here, but Pew says the basic problem is that "while consumer credit cards in general no longer include unpredictable pricing structures and hair-trigger penalty interest rates, these and other potentially harmful practices remain common on business credit cards that millions of individuals use."
Pew says it analyzed a sample of the more than 10 million offers that households receive every month for business credit cards, and found that a majority of the cards "have potentially harmful terms that would not be legal on those labeled for consumer use." For example, Pew found that 80 percent of "business" credit cards pitched to households "included an 'any time' change in terms clause with no right to opt out."
Nor does having a business credit card spare you from ill effects on your personal credit record. Pew says "business card products require applicants to be personally liable for all charges under the business account," and as many corporate card holders have discovered, late payments and other failings show up on their personal credit-bureau files.
Pew calls for extending Credit CARD Act protections "to any credit card that requires an individual to be personally or jointly liable for account expenses." At the very least, it suggests that card applicants "receive warnings whenever a credit card is not protected by the Credit CARD Act."
The high volume of these offers directly to households makes it clear that these aren't special-purpose credit cards for businesspeople, but just clever attempts card issuers to exploit a loophole in the law. Pew's right: It's time to fix the law's flaw.
Click here to see the home page for all the Safe Credit Cards Project's research.