FOR IMMEDIATE RELEASE: September 1, 2010


With CARD Act Now Fully In Effect, Card Companies Have Increased Mailings To Promote Corporate Cards—Which Are Not Covered By New Law—By 256%

Unwitting Consumers Don't Realize Until After The Fact That These Types of Cards Don't Come With Protections Such as Bans On Interest Rate Increases

Schumer Blasts Deceptive Marketing Of Corporate Cards, Calls on Feds To Stop C

WASHINGTON, DC—U.S. Senator Charles E. Schumer (D-NY) today expressed alarm about a new tactic credit card issuers may be using to evade last year’s milestone credit card law, warning that card issuers are increasingly pushing consumers into signing up for corporate cards that are not subject to the law’s protections. In a letter to the Federal Reserve, Schumer pressed for a crackdown on this potentially abusive practice so that unsuspecting consumers are not lured by card offers intended to circumvent the law passed by Congress.

“Credit card companies seem to be purposely hawking corporate cards to consumers who don’t own a business and may even be retired. This is more than deceptive marketing; it is a dirty trick meant to get around the new credit card law. We need to put an immediate stop to this scheme, but in the meantime, consumers should be sure to read the fine print of the offers they are getting in the mail. This is the latest, most brazen attempt yet by the credit card industry to get around the law,” Schumer said.

Last year’s credit card law, signed by President Obama, imposed a host of reforms on consumer credit cards, such as a ban on rate increases in the first year of a cardholder’s agreement and a requirement that the card issuer provide 45 days notice before a rate increase can be assessed in later years. But these reforms are not applicable to corporate, or professional, cards – which are intended for use by small business owners.

Not coincidentally, credit card companies appear to now be marketing these corporate cards more widely, to ordinary consumers who don’t own a business and may even be retired. According to a market research group Synovate, mailings for corporate cards increased a whopping 256 percent in the first quarter of 2010. Average consumers are unwittingly signing up for the cards without realizing they are not covered by the stronger rules governing personal credit cards. In fact, the card companies appear to be playing to that confusion in the application materials for these corporate cards. A published report last week noted that an application form recently issued by one major card company no longer includes a section seeking detailed information about the potential cardholder’s business. Instead, the application merely requires a box to be checked indicating "Yes, I am a business owner" or "Yes, I am a business professional with business expenses.” This simplified application could easily prevent a card applicant from realizing the nature of the card they are signing up for.

In response, Schumer proposed today in a letter to Federal Reserve Chairman Ben Bernanke that card companies be required to solicit and verify an applicant’s federal tax identification number before approving a corporate card application. This way, Schumer said, the card companies would no longer be able to trick an ordinary consumer into signing up for a card that is not covered by the new credit card law.

Schumer’s push to stop this deceptive marketing of corporate cards to average consumers is supported by leading consumer rights groups.

“Credit card companies are looking for every loophole they can find to evade the important protections Congress passed last year, which is why the new consumer bureau needs to watch them closely. Consumers may fall for one of these professional cards thinking it gives them prestige, not realizing that small business credit has little protection against unfair or deceptive practices,” Lauren Saunders of the National Consumer Law Center said.

A copy of Schumer’s letter to Bernanke appears below.


September 1, 2010


Honorable Ben Bernanke

Chairman, Federal Reserve Board

20th Street and Constitution Avenue, NW

Washington, DC 20551


Dear Chairman Bernanke:

I write to you today to express my concerns about the ramp up in marketing of business credit cards to consumers.  According to recent industry research, credit card issuers have boosted the circulation of business credit cards by 256% over the course of a year to 47 million consumers in the first quarter of 2010.  I fear that this surge is motivated by credit card issuers seeking to bypass the tough and smart consumer reforms recently enacted with the passage of the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (“Credit CARD Act”).

As you may know, business credit cards, also known as “professional credit cards,” are not governed by the recent reforms enacted in the Credit CARD Act.  As a result, professional credit card holders are not protected from the abusive practices—unfair interest rate hikes and changes in terms, excessive fees and penalties, and aggressive credit card solicitations—that are now regulated under the new law for personal credit card holders.  I believe that credit card issuers are exploiting this distinction in order to evade the tougher regulations passed by Congress and preserve their ability to profit from unfair and excessive fees.

Although I am encouraged by reports that some in the industry, like Bank of America, have proposed to extend some consumer protections to professional credit card holders, I remain concerned that the majority of the industry will continue to market professional credit cards to consumers who do not realize that these accounts do not offer the same protections as personal credit cards. I wish to propose that the Federal Reserve issue requirements for business credit card issuers’ applications that will make it clear to the customer that they are not applying for a personal credit card.  For example, if the Federal Reserve required business credit card issuers to collect a tax identification number on corporate card applications, this would help prevent consumers from unwittingly signing up for a business credit card account to only find out later on that their account is not held under the same protections that a personal credit card account can offer.

Thank you for your consideration of this matter.  Feel free to contact me or my staff at your convenience if you have any further questions.



Charles E. Schumer

United States Senator