Photo of a building in the Wall Street District
Banks are finding ways to get around credit card laws and make money. CC by epicharmus/Flickr

Consumers won a strong set of protections with the passing of the Credit Card Accountability and Responsibility and Disclosure Act of 2009. But banks managed to arrange for a loophole in the form of “professional cards.” Congress was convinced to make professional cards exempt from late fee limits and interest rate ambushes. The prospect of losing billions in the form of illegitimate fees has credit card companies scrambling to recruit unwitting consumers for professional cards, also referred to as corporate cards or small business cards.

Card issuers finagle exemption from CARD Act

The primary target for professional credit cards used to be business owners and corporate types. The Wall Street Journal reports that since the CARD Act was passed in March 2009, credit card companies have been pushing professional cards to people who don’t need them. In an effort to dodge the consumer protections provided by new credit card rules, credit card companies are swamping ordinary consumers with credit card applications for professional cards. According to the research firm Synovate, 47 million professional credit card offers were mailed in the first quarter of 2010 — a 256 percent increase from the same period the year before.

Professional cards: the devil in disguise

Before consumers apply for a professional card, small business credit card or corporate card, they should be aware of several credit risks. CreditLoan.com reports that banks will apply any payment made over the minimum to the lowest interest balance. Until the lower interest balances are paid off, the higher rate balances continue to accumulate interest. Allowing 21 days from when a statement is postmarked and the payment is due isn’t required, which allows banks to shorten the window to make it harder for cardholders to pay on time. Payments one day late can trigger huge interest rate increases. Additionally, credit card companies can change terms on a whim, and card holders won’t notice that their interest rate, transaction fees, annual fees and penalty fees have increased unless they bother to read the fine print on their statement.

Closing the professional card loophole

There’s a reason professional cards escaped regulation, says MSNBC’s Bob Sullivan. His argument is that when Congress legislates on behalf of consumers, small business gets the short end of the stick. Sullivan offers the example of credit card fraud, and how small businesses are stuck with the consequences . Most cardholders don’t realize that their liability protection from credit card fraud comes at the expense of the business that makes the transaction with the lost or stolen card. Sullivan said that if businesses were granted the protections the CARD Act provides to consumers, everyone would be better off when credit card companies can’t take advantage of the present loopholes.

Additional reading

Wall Street Journal: http://wsj.com

Credit Loan: http://creditloan.com

MSNBC: http://www.redtape.msnbc.com

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