Consumer protections under the CARD Act should be applied to small-business credit cards, according to a lead-generation website that tracks card products.
Most of the 10 largest credit card issuers make small-business cardholders personally liable for use and report account activity to their personal credit reports, CardHub.com's study found. The study, released Tuesday, was based on a review of account applications and terms and conditions as well as contact with the banks.
Small-business cards were exempt from the Credit Card Accountability, Responsibility and Disclosure Act of 2009, which put limits on issuers' ability to raise interest rates, charge late fees and take other actions on consumer accounts.
CardHub.com said its findings show that CARD Act measures should already apply to small-business cards.
In March Rep. Nita Lowey, D-N.Y., introduced legislation that would apply some of the same provisions to small businesses by amending portions of the Truth in Lending Act.
Sixty-four percent of businesses with 50 or fewer employees used small-business cards and 41% used personal cards as of the end of 2009, according to a study the Federal Reserve Board published last year.
The CardHub.com study rated the 10 largest credit card issuers on disclosure transparency, giving them a "good," "mediocre" or "bad" rating based on whether it is easy to determine whether a small-business card customer is personally liable for use and whether the bank reports the use of such cards to credit bureaus for customers' personal credit reports.
Wells Fargo & Co. was the only issuer on the list to receive a "bad" rating. CardHub.com said it is unknown whether Wells Fargo customers are personally liable. The bank also did not say whether it reports use of small-business credit cards, the study said.
In response to questions from American Banker, a Wells Fargo spokeswoman said by email that its small-business cardholders are personally liable for card use and it does report to the major credit bureaus when a customer's account charges off.
Citigroup Inc., HSBC and U.S. Bancorp each received a "mediocre" rating. All three issuers hold customers personally liable for small-business card use. Citi reports use to cardholder's personal credit reports depending on the situation, the study said. HSBC and U.S. Bancorp did not respond to the question for CardHub.com.
A U.S. Bancorp spokeswoman said by email that USB reports to the cardholder's consumer credit bureau when it charges off an account.
Citi and HSBC did not immediately respond to inquiries Tuesday.
American Express Co., Bank of America Corp., Capital One Financial Corp., JPMorgan Chase & Co. and Discover Financial Services received a "good" rating.
USAA Federal Savings Bank, which was included in the study, does not offer a small-business credit card, so it did not receive a rating, CardHub.com said.
