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Cards for business use only

By Marcie Geffner · Bankrate.com
Thursday, June 16, 2011
Posted: 3 pm ET

It's a dirty little open secret that credit card issuers have offered millions of so-called "business" credit cards to consumers in an attempt to skirt new federal consumer protection laws that don't apply to these cards.

In an effort to change that, four U.S. senators this week sent a letter to Federal Reserve Chairman Ben Bernanke, asking the Fed to "take immediate steps" to help protect consumers from inadvertently accepting credit cards that don't offer the added protections. The four senators were Charles E. Schumer, D-N.Y., Jack Reed, D-R.I., Bill Nelson, D-Fla., and Robert Menendez, D-N.J.

The senators want the Fed to force credit card issuers to state clearly in their marketing materials that an offered card is a business card and disclose that the card might not have all the same protections as a consumer-oriented card, according to a press statement on Menendez' website.

The senators also want the Fed to require consumers who apply for a business card to provide a business tax identification number as part of their application. That, the thinking goes, would reduce the number of consumers who unknowingly sign up cards that are intended for businesses.

The extra protections are part of the Credit Card Accountability, Responsibility and Disclosure, or CARD, Act, which bans interest rate increases during the first year in which a credit card account is opened, requires 45 days' notice prior to most rate increases in the following years and prohibits interest rate increases on existing balances in most circumstances. Those protections exist only on consumer, not business credit cards.

"While we are encouraged some banks, such as Bank of America and Capital One, have taken voluntary steps to protect consumers," the senators wrote to the Fed chairman, "we are very concerned issuers are marketing these products to ordinary consumers who may not realize they do not offer the same protections as personal cards."

A Pew Charitable Trusts study released last month found that U.S. households get more than 10 million offers every month for business credit cards, and that a large majority of these cards have terms that wouldn't be legal on cards intended for consumers' use.

Follow me on Twitter: @marciegeff

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