H. R. 5156
IN THE HOUSE OF REPRESENTATIVES
April 29, 2016
Mrs. Lowey introduced the following bill; which was referred to the Committee on Financial Services
To amend the Truth in Lending Act to provide coverage under such Act for credit cards issued to small businesses, and for other purposes.
Short title; Findings
This Act may be cited as the
Small Business Credit Card Act of 2016.
The Congress finds as follows:
Economic growth has frequently been led by the creation of millions of new, small businesses.
Today, small business owners are severely limited in their ability to finance new business ventures because access to capital through traditional resources has been restricted.
Small businesses are being pushed into using credit cards to meet capital needs.
This use of credit cards is especially true for innovative and rapidly growing businesses which lack the assets necessary for a traditional loan.
In 2012, 31 percent of the small businesses surveyed used credit cards to meet their capital needs.
In 1993, only 16 percent of small businesses used credit cards as a source of financing.
One-half of small businesses using a credit card carry a monthly balance, and one-quarter of small businesses carry a monthly balance in excess of $10,000.
The average interest rate charged on small business credit cards is 15.6 percent.
Nearly one-half of small businesses with credit cards have reported a worsening of terms, including increased interest rates, fees, and payment procedures, making it more difficult to expand operations or grow business.
Small business credit cards contracts do not include consumer protections provided to individuals under the CARD Act.
Extending credit card protections under the Truth in Lending Act to small businesses
Definition of consumer
Section 103(i) of the Truth in Lending Act (15 U.S.C. 1602(i)) is amended—
The adjective and inserting
consumer, used with reference to a credit transaction, characterizes the transaction as one in which the party to whom credit is offered or extended is
Except as provided in paragraph (2), the term
consumer, when used as an adjective to describe or modify a credit transaction or credit plan, means a transaction or credit plan under which credit is offered or extended to
by adding at the end the following new paragraph:
Small business included under certain circumstances
For purposes of any provision of this title relating to a credit card account under an open end credit plan, the term ‘consumer’ includes any qualified small business.
Qualified small business
For purposes of subparagraph (A), the term
qualified small business means, with respect to any credit card account under an open end credit plan, any business concern having 50 or fewer employees, whether or not—
the credit card account is in the name of an individual or a business entity; and
any credit transaction involving such account is for business or personal purposes.
Exclusion of small business after
opt out effective date
qualified small business shall not include any business concern described in subparagraph (A) after the effective date of any election under section 135(b) by the individual or business for which the credit card account referred to in such subparagraph has been established, so long as such election remains in effect.
Amendments to exemptions
Section 104(1) of the Truth in Lending Act (15 U.S.C. 1603(1)) is amended—
other than a credit transaction under an open end consumer credit plan in which the consumer is a qualified small business after
agricultural purposes; and
other than qualified small businesses after
Business credit card amendments
Section 135 of the Truth in Lending Act (15 U.S.C. 1645) is amended—
The exemption provided by and inserting
(a) In general.—The exemption provided by; and
by adding at the end the following new subsection:
Qualified small business opt out from coverage
Notice of coverage
The disclosures under section 127(a) before opening a credit card account under an open end credit plan for a qualified small business shall include a clear and conspicuous disclosure—
that the qualified small business is treated as a consumer under this title and is subject to the requirements of this title as a consumer;
that the business may elect, in accordance with this subsection, to be exempt, under section 104(1), from this title to the same extent as any business other than a qualified small business; and
of the procedures for making the election and for subsequently revoking any such election.
The Board shall prescribe procedures for making an effective election under this subsection and for revoking any such election.
Prohibition on discrimination against qualified small business
No creditor may—
discriminate against any business concern having 50 or fewer employees in connection with any credit card account of, or any application for a credit card account by such business, under an open end credit plan on any basis; or
require any qualified small business to make an election under this subsection as a condition for opening a credit card account, or for providing more advantageous terms for any credit card account, under an open end credit plan.