- The Washington Times - Wednesday, May 18, 2011

While a 2009 credit card reform law has brought more transparency and legal protections for regular cardholders, many consumers are still being targeted for business credit cards that don’t carry the same safeguards, according to a new study.

“A lot of credit cards are going out every month that don’t have these same protections,” said Nick Bourke, director of Pew’s Safe Credit Cards Project, which released the study Wednesday. “They’re putting people on the line.”

Pew found that 9.1 percent of all credit card offers mailed to American households are business card offers, an average of 44 million business credit card offers each month. That totaled 2.6 billion such offers from January 2006 to December 2010, when the study was conducted.

These cards primarily target customers for corporate, small-business, and professional use. But they also are marketed to professionals and business owners who want to separate their personal and company expenses, and even regular consumers who have no ties to business can sign up.

Often, customer are enticed to sign up by an initial “0 percent” offer that later gives way to much higher rates.

These business credit cards still hold the cardholders — not their companies — personally liable for payments, and their terms and conditions fall outside the new consumer credit card regulations.

So practices like hair-trigger interest rate hikes, where the card’s interest rate increases if the customer’s payment is one day late, may still apply. On consumer cards, by contrast, card issuers must give the cardholder 45 days’ notice for rate increases on future transactions, and they cannot increase the rate on outstanding debt unless the account has become 60 days late.

By contrast, according to Pew, four out of five business credit cards retain the right to change rates and fees at any time.

Unpredictable rate increases also can occur, even if the cardholder is making payments on time, The Pew survey said consumers often have no way of knowing this would happen when they signed up.

The Pew report recommended that regulators issue new rules requiring business card issuers to alert applicants whenever a credit card is not covered by the new federal consumer law, “specifically highlighting the risk of significant interest-rate increases on existing balances and higher costs from penalties, payment processing and fees.”

“People end of paying a lot more money when they have a credit card like this, and they don’t always understand why,” Mr. Bourke said.