Though U.S. consumers can look forward to some relief under the credit card reform bill signed into law last week by President Obama, small-business owners may not be so lucky.
Congress is reining in the penalties that banks can levy on their riskiest borrowers. Card issuers stand to lose billions in revenue. They may seek to make it up from other plastic-wielding customers by raising interest rates, scaling back rewards and imposing annual fees. Small-business cardholders could be prime targets.
"It's no secret that [banks] are hurting and looking for any source" of revenue, said Molly Brogan, spokeswoman for the National Small Business Assn., based in Washington.
The new law, which shields consumers from predatory fees and sudden rate hikes, doesn't include customers holding credit cards backed by their companies. An amendment that would have extended the protections to cardholders whose businesses have fewer than 50 employees was killed before the final bill was voted on.
Amendment author Sen. Mary L. Landrieu (D-La.), chairwoman of the Senate Committee on Small Business and Entrepreneurship, hasn't given up on winning the changes for small firms.
"We will look into other legislative vehicles," said Scott Schneider, committee spokesman.
Many small firms rely on credit cards to pay for everything from paper clips to equipment. Even more are doing so as the recession has limited access to other credit. Some are already feeling the sting of higher rates.
Television writer and producer Bill Taub, president of Jabberwock Corp. of Los Angeles, didn't notice for four months that the interest rate on his Advanta small-business credit card had jumped to 19.99% from 7.99%. A call to customer service got it dropped to 10.99%, but he said his request for a refund was refused.
"That was outrageous," said Taub, whose TV credits include episodes of "Hollywood Babylon" and "Relic Hunter." He hadn't yet heard that Pennsylvania-based Advanta Corp., which has been hit with rising losses in its portfolio, won't allow any of its small-business customers to put new charges on their cards after June 10. Taub is one of as many as 1 million cardholders who will have to turn elsewhere for credit.
Anna Perelman, co-owner and chief operating officer of Vestalife, a Studio City maker of Apple iPod speakers, said her firm also was being hit with interest rate hikes and credit-limit cuts, seemingly out of the blue.
