On May 22, 2009, President Obama signed the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009.
The legislation is intended to strengthen consumer protection in the credit card industry and put an end to unfair rate hikes and hidden fees.
Prior to the Card Act of 2009 consumers paid approximately $15 billion in penalty fees.
These fees were a result of deceptive and unfair credit card contracts that most consumers were unaware of or did not fully understand.
The Card Act of 2009 increases transparency and accountability. Score one for the consumers, right? Not so fast. It did not take the credit card industry long to come up with a way to get around the Card Act of 2009 by offering consumers “professional credit cards.”
Traditionally professional cards, also known as small business credit cards or corporate credit cards were offered to small business owners and company executives. But increasingly, consumers without businesses are being offered “professional credit cards.”
Credit card companies have found a loophole in the Card Act of 2009. The legislation does not apply to professional cards. Professional credit cards do not have the same protections as consumer credit cards. There are no protections in place for professional cards and interest rates can be raised without notice and fees can be applied without clear explanation.
Banks and credit card companies do not want to lose the lucrative revenue derived from penalties and fees which would explain why in 2010 there was an increase in offers for professional cards to consumers without a business.
According to the research firm Synovate, in the first quarter of 2010 credit card issuers sent out 47 million offers for professional cards which was an increase of 256% from the same period of 2009. The Wall Street Journal reported many consumers are unaware the professional cards do not come with the same protections as personal credit cards.
Apparently Chase Bank knows all too well the loophole in the Card Act 2009 legislation as they are aggressively promoting the Chase Ink credit card. Consumers are being inundated by promotions for the Chase Ink card. In the past, only small business owners and executives were targeted for professional cards.
The Chase Ink credit card is classified by Chase Bank as a “professional card” which means interest rates can be raised at will, new APR’s can be applied to prior balances, payment cycles can be shortened and inactivity fees can be applied. There are no laws in place to prohibit banks and credit card companies from issuing professional credit cards to consumers, without businesses.
Watch out for any offer of a professional credit card if you are a non-business owner because what may look like your typical credit card is far from typical.
Banks may be able to recoup some of the lost revenue by replacing consumer credit accounts which are protected by the Card Act of 2009 with professional credit cards. Josh Frank, a senior researcher at the Center for Responsible Lending, says “By pushing professional cards to consumers who otherwise wouldn’t want them, card issuers can get around some of the provisions of the Card Act.”