Congress favors small business credit cards to the detriment of small businesses
From big business's point of view, small business has been favored by the new credit card laws that have been in effect since February 22, 2010. Small businesses are exempt from these credit card rules, and small business credit cards may continue to be used in ways these new laws attempt to prohibit. These new rules are designed to afford consumers protection. While big business is being compelled to extend this protection to the consumer, the small business is allowed to continue such practices as rate increases, and interest charge maximization through payment allocations. Small business credit cards will continue to be a means whereby a business may exploit the consumer to its profit, while big business credit cards will be held to higher ethical standards, standards the consumer wants. In the short term, small businesses will be tempted to continue using their cards in this exploitive manner, but to their own detriment.
Consumers are smart. Having a choice between an exploitive business and one compelled to ethical standards, the consumer will go with the latter. Allowing small business to continue using unethical standards, Congress has enabled a small business to hang itself.
Consumer advocates are concerned that small businesses will not only continue to use these exploitive measures; they will increase them. Given free rein, small businesses will be permitted to enact policies that will almost certainly increase their income and as certainly decrease the value of products and services they will sell to the consumer. In the interest of protecting the consumer, these groups are urging Congress to extend the Credit Card Accountability, Responsibility & Disclosure Act to small business. By May 22, 2010, Congress will reveal its stance on this issue, but the consensus is that small businesses will remain exempt. Because few people recognize that these credit card laws do not apply to all businesses, the consumer will probably take on small business credit cards with the expectation that those cards operate under the same laws as do the large corporation credit cards. Consumer advocates emphasize that the uneven application of these laws among businesses will result in greater consumer debts and, when the mistake is finally realized, consumers will cease to apply for credit, to the detriment of an already trouble credit industry.
While there is merit in these arguments on behalf of the consumer, the least mentioned warning is to small businesses and what small business credit cards escaping reform will do to small business in general. Exploiting consumers through credit card games is not necessarily going to increase profits. Many large businesses do not expect any decrease in profits because of the new laws. Small businesses can adhere to these rules without expecting any significant decrease in their profits or their ability to extend credit. While there will be some small businesses that will insist otherwise and continue exploitive practices, other small businesses will smartly followed these new laws, recognizing that consumers are smart enough to recognize a good deal when they see one. Unfortunately, those small businesses that do continue exploitive practices will tarnish the standing of small businesses among the consumers, and all small business will have to carry the burden.
If you're running a small business, recognize when what seems to be a considerate exception for small business is actually an invitation for dissolution. Beware of Congressional gifts. Ask yourself, as a consumer which would you prefer, big business credit cards or small business credit cards. Your answer will tell you who is really being favored by Congress.
