CARD Act Doesn’t Cover ‘Professional’ Credit Cards

In an attempt to work around the restrictions imposed by the new Credit CARD Act, some credit card issuers have started offering small-business credit cards. Called “professional” credit cards, these credit offers are going out not only to small business owners and entrepreneurs but to unsuspecting consumers. Credit repair professionals are warning business owners and consumers to carefully read all the fine print before they apply for one of these cards. 

Unbeknownst to those who sign up, professional credit cards are not covered under the federal government’s new credit card regulations and can wind up burdening card holders with sky-high interest rates and hefty penalty fees. No law restricts issuers of professional credit cards from jacking up interest rates, increasing rates without notice or charging card holders monstrous penalties for late or missed payments.

Consumers who sign up for these credit cards leave themselves open to financial abuse. Because small-business credit cards are not covered by the recently implemented Credit CARD Act, card holders won’t have a legal leg to stand on if they’re victimized by card issuers. This specialty class of unprotected credit cards has the potential to damage credit scores and push consumers struggling to repair their credit back into high risk limbo, warn credit repair professionals.

New York Senator Charles Schumer has asked the Federal Reserve to investigate credit card issuers who are pitching professional credit cards directly to consumers. The new Credit CARD Act was designed to protect individual consumers from credit card abuse. The protective measures mandated by the CARD Act do not apply to business credit cards. Terms for business credit cards can vary considerably with the issuer. Some issuers like Bank of America, are also choosing to apply a few –  though by no means all — of the protective CARD Act measures to the business credit cards they offer. Late fees for business card holders, for example, range from $19 to $49, almost double the $25 limit allowed on consumer credit cards under the new Credit CARD Act.

Credit repair counselors urge consumers to fully inform themselves before obtaining any form of credit. Credit card offers should be carefully weighed before application is made and terms thoroughly read before beginning to use a new credit card.