New Card Legislation Does Not Protect Business Card Holders or Returning Military

The new credit card protections for consumers are on the way come July 1, 2010 –  helping protect consumers from double-cycle billing, too short of a grace period for making payments, limiting subprime credit card fees and requiring issues to allocate any payments made above the minimum amount due to highest interest debt first.  Before you breathe easy, you might be interested to know that the rules don’t cover commercial credit cards for either small business owners or large corporate accounts.

The upcoming changes to the credit card industry are the biggest changes made in nearly 30 years, and are approved by regulators from the Federal Reserve, Office of Thrift Supervision, and the National Credit Union Administration.  The Federal Trade Commission Act bans unfair and deceptive trade practices, and the new credit card regulations are based on those consumer protections.

Somewhat surprising was the realization that consumer protections on credit cards don’t carry over into credit cards for business or corporate use.   Commercial credit cards include corporate travel and entertainment cards, small business credit cards or debit cards, prepaid commercial cards, as well as fleet cards.   While the commercial cards are not covered by the upcoming changes to the credit card industry, they’re experiencing much of the same issues as consumers right now, as far as credit limit cut backs or cards being canceled as issuers try to reduce their risks.

In a teleconference about unfair credit card practices held by the Federal Reserve, Office of Thrift Supervision and National Credit Union Administration, Benjamin Olson, an attorney for the Federal Reserve said the new protections “… apply to consumer credit cards, accounts for personal use”.  Olson and three other representatives from the agencies present at the teleconference spent more than two hours answer questions from lending institutions and credit unions regarding the details of the new rules.  The briefing was meant to help card issuers who hadn’t already begun the process of implementing the rules to get on board and beginning planning for the changes.

Olson warned the card issuers participating in the teleconference that although the new rules technically only apply to consumer credit cards, the standards of unfairness that are outlined in the FTC Act will “still apply” to commercial cards.

Returning Military Personnel

The teleconference shed some new light on the regulations for commercial and corporate credit cards, but the impact on returning military personnel is still up in the air.  Apparently, no one had yet anticipated what the new credit card rules of July 2010 will mean for active military personnel returning home from duty.

Currently, the Service members’ Civil Relief Act states that credit card issuers to military personnel who are deployed on active duty service must lower their interest rates to 6% while deployed.   As soon as they return home though, the credit card interest rates are increased to their previous amounts.  The new credit card rules of 2010 indicate that interest rate increases may only apply to a few circumstances – and returning from military active duty is not one of those circumstances.

When a credit union representative presented this question to the Federal Reserve attorney during the teleconference, he was stumped.  Prior to the changes in card legislation, over 65,000 comments were submitted to the Federal Reserve in 2008 regarding the proposed credit industry changes.  Not one of them asked about returning troops.  He said, “it didn’t come up in the comment period. We’re now aware of this issue and we’re trying to figure out what we can do to fix it.”

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This entry was posted on Saturday, February 28th, 2009 at 6:49 am and is filed under Credit Card News, Tips & Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.