Fed asked to crack the whip on card companies marketing business credit cards to consumers

Senators have now asked the Federal Reserve to crack the whip on credit card companies who are marketing business credit cards to customers and thereby circumventing the consumer protection laws.

Sen. Charles Schumer (N.Y.), Bill Nelson (Fla.), Jack Reed (R.I.), and Robert Menendez (N.J.) have sent a joint letter asking the Fed Reserve Chairman, Ben Bernanke to take suitable action on the card issuers who are getting unwitting customers to sign up for business credit cards without knowing the consequences.

When the CARD Act was passed, there were a new set of requirements imposed on consumer credit cards. This Act was passed in 2009 and as per the Act the card companies had to give a 45-day advance notice period to consumers in case they planned to hike the interest rates or any such fees. There was also a cap on the amount of fees that a card could accumulate.

However, the senators feel that the card companies are finding ways and means to avoid meeting these requirements, by offering business credit cards to individuals. Consumers are also not being informed about the protections that they would tend to lose by opting for the business credit cards.

The recent study conducted by the Pew Charitable Trust found that an average American household received more than 10 million offers every month for business cards. This data is now being used by the senators to support their demands. The study found that the terms on business cards were harmful for consumers and is also illegal.