A batch of new restrictions aimed at curbing the most egregious credit card practices kick in Monday, but business owners will need to stay alert — the new rules don’t cover cards used for corporate purposes.
The bill Congress passed in May reforms the Truth in Lending Act, which governs only consumer credit. The measure fulfills a wish list of long-sought reforms. Issuers won’t be able to hike the interest rates on existing balances as long as customers pay their bills on time, and they’ll need to notify customers at least 45 days in advance of interest rate increases and most fee changes.
Those two changes alone will save consumers an estimated $10 billion annually, nonprofit research firm Pew estimated in a recent report.
“Regulation” is often a dirty word to small business owners, but few would object to new laws offering them similar protection. With bank loans and credit lines drying up, credit cards are one of the only sources left for fast capital injections.
Nearly 60% of business owners polled recently by the National Small Business Association said they use plastic for their capital needs — and 79% said the terms of their credit cards have grown worse in the past five years.
“Regulation, particularly in the long-term, is good for the consumer. But these regulations won’t be there for the small business owner,” says Curtis Arnold, founder of CardRatings.com. “They’re going to have to be on their toes to protect themselves.”
If business cards aren’t regulated but personal cards are, will business owners switch to their personal plastic?
Patricia Curry, founder of Wellhaven, an online retailer of gifts for senior citizens and baby boomers, says she never considered giving up her business cards.
“A business attorney will tell you that mixing personal and business finances is ‘piercing the corporate veil,’” she says. “We simply don’t do it and will not, regardless of what the banks and credit card issuers do.”
Industry experts say that’s the safest path.
FULL STORY: http://www.cnn.com/2010/US/02/22/credit.card.rules.small.business/index.html?hpt=T2
Comments
IMHO the new rules didn’t go far enough. It should have frozen the interest rates. Now everyone’s cards are at a 20+% interest rate. So, how did this help CC users? Their rate went up in some cases doubled causing them to pay more. So now instead of paying off your debit in 10 years it will take 20 (which is not the case with me).
#Do you Want to say something?