Business Credit Cards & Personal CC

Dear Brenda,

A very interesting question. I hope your query will trigger an extremely lively discussion on this issue.

It may be that no permissible purpose exist's when a sole proprietor applies for business credit, in the name of your business, for the credit grantor to pull your CR at all. I'm not sure yet but I'm reviewing an FTC Staff opinion that speaks to this issue.

I say "MAY" because there is case law that goes both ways on the issue.

In part it says; When a corporation, partnership, or other business entity -- rather than an individual -- applies for commercial credit, there is thus neither an "extension of credit to (a) consumer" or "a business transaction that is initiated by a consumer" to provide a permissible purpose under either Section 604(a)(3)(A) or (3)(F)(i).

Because "extension of credit to ... the consumer" (emphasis added) is a prerequisite to the application of Section 604(a)(3)(A), where the application is made by a business entity, the provision does not provide a permissible purpose for a lender to obtain a consumer report on a guarantor or co-signer for -- or a principal, owner, or officer of -- the commercial credit applicant.

The opinion is at: http://www.ftc.gov/os/statutes/fcra/tatelbaum.htm

As PP has been a jumpy topic on this board of late, I'd LOVE to see some serious discussion here.

Experts???

 

And further;



Section 604(a)(3)(F)(i), which provides a permissible purpose only for a "transaction that is initiated by the consumer," is also inapplicable to a credit transaction initiated by a business entity. The provision does not encompass commercial or credit purposes; rather, is designed to provide a permissible purpose to a business that is considering a consumer application for a purpose other than credit, employment, or insurance set forth in Sections 604(a)(3)(A), (3)(B), or (3)(C).

<bump>

 

If you are signing personally,not as a corp. or LLP, they will check your credit to the same extent as any personal credit application. One thing you should be aware of, if you get the card, you will have NO protection under the FDCPA, or the FCRA for any transactions with that creditor.

 

Of course they will. But they lack permissible purpose. Which is my point.

Heck, you're right so much so that we could probably make a living just suing these creditors for pulling CR's with PP.

 

They will check your personal credit even on a corporation if you sign as the personal guarantor/company officer. I have several business accts from my incorporated small business, and not only did they all CHECK my credit before opening the acct, one even REPORTS on my personal credit report. I've read Tatelbaum, and have tried to argue it (with the OC) unsuccessfully. Whether or not their arguments would hold up in a court of law, I don't know. There is a tiny printed acknowledgement right above the sig line on credit apps that says something like "By signing below, I acknowledge and agree on behalf of the Business and myself as the Authorized Officer that . . . XXXX company may investigate and exchange reports regarding information on the Authorized Officer and the business entity with credit reporting agencies and others;" If there is a legal standing, I would assume that's it. I also called the FTC myself and asked, and was told (apparently after much researching and talking amongst the FTC people on the desk) that they can check credit on an officer of the corporation (even if there's no statement like that above), but not on other employees. I was skeptical though because they were rather uncertain, and because the parts of the FCRA that they called out had nothing whatsoever to do with business apps, and because their advice was directly contradictory to Tatelbaum. Anyway, I don't know what the law would allow if it were challenged, but I can say with absolute assurance what DOES happen. They will check personal credit, and some will report. AMEX does check personal credit by the way, but they don't report on the personal report. Hope that helps.

 

Correction: WITHOUT PP.

 

Brenda, one more thing about dealing with AMEX for business cards -- if you get one, make sure you don't even go a few days past due. I had a bus Optima which was only 7 days overdue. They called it "in default" and sent it to collections and asked for the ENTIRE balance at once. (They didn't even bother to tell me they were closing it either. First thing I knew about it was when the CA called.) Apparently, they had done an AR and didn't like what they saw, so they used the seven days late as an excuse. The CA insisted that it must be 90 days late or they wouldn't have gotten it. The AMEX CSR on the other hand was as flabbergasted as I was about why they sent it to collections as she said the record showed I "paid like clockwork." She's the one who told me why they probably did it. Anyway, I was left to deal with the CA who treated me like x*$#. (If I'd known then what I know now, I'd have sued them for violation of FDCPA.) Anyway, my AMEX business story . . . that one huge balance getting called unexpectedly very nearly put my business under. Just a friendly warning -- AMEX is in my experience very unsympathetic toward small business, so CYA. That's my unsolicited advice!

 

I tend to disagree, AMEX is extremely helpful to a small business. They have extended credit to the corps. I am involved with. They have increased the lines of credit numerous times without me initiating it and the rates are very reasonable. I don't have a personal AMEX, but I have 18 other credit cards.

www.creditsense.com

 

If I treated my customers like American Express treated my friend I would be out of business by the end of the day!

My friend is a private investigator who owns his own business with all the proper certifications and licenses necessary for such a intensely regulated job. He applied for and was approved for AmEx Gold under his corp (after they had made a verification call to HIS BROTHER and shared confidential information) He was out to lunch with a client one day before he even received his first bill and the card was declined. Apparently AmEx had decided on their own that he was a fraud and wanted to cancel the card. He provided a copy of his corp resolutions, licenses etc to no avail. My friend ended up telling them to stick it that he didnt need their business. He now has an account with a reputable company that actually appreciates his business (over five thou a month) and treats him with respect.

My advise...keep far away from American Express. Who needs the hassle and embarrassment?

 

I don't dispute you story, but I have been a member since 1984 and never ever had a problem with my AMEX accounts. Their customer service has been unmatched by any other creditor.

www.creditsense.com