Rotating Header Image has published a “Credit Cards and Small Business Usage Report”

A “Credit Cards and Small Business Usage Report” has been released by

Small Business and Credit Cards Usage Report CoverCREDIT CARDS AND SMALL BUSINESS USAGE REPORT

An issue that arose when Chase Card Services decided that it did not want to honor a promotional offer as was indicated by a change in terms notice that it disseminated to customers late last year (i.e., beginning around November-December of 2008).  This report allows readers to gain a better understanding of the nature and scope of credit card usage by small businesses.  We especially highlight entrepreneurial bootstrappers (who often use credit cards as a non-traditional source of capital).

The publication is organized in sections, and the information is “based on a variety of authoritative sources including U.S. Census Bureau, Federal Reserve Board, and Small Business Administration data, in addition to previously published research studies,” said Dr. Robert Lahm, founder of the site.  The publication also includes information about several class action lawsuits that have already been filed against Chase.  Dr. Lahm, who is also an entrepreneurship professor employed by Western Carolina University’s Center for Entrepreneurship and Innovation (CE&I), explained that he created the site in protest and to fight abusive credit card company practices in general, “but it just so happens that Chase’s recent actions are viewed to be among the most deplorable and unethical moves that I know of, with painful consequences for many small businesses that could certainly have a lasting impact on our economy.”

Dr. Lahm said the present publication was developed primarily for three audiences: individuals who either have or may soon experience “Chase statement shock” when they discover a substantial increase in their monthly minimum payments (which is two-and-a-half-times larger than their previous payment); members of the general public who are typically only getting a one-sided view of this issue (“because journalists are not digging deep enough”); and, for would-be or current small business owners.  He added that while the document is copyrighted, other writers and bloggers my find the report useful (and it may be freely shared).

Citing an example of media spin, Chase spokespersons (and other correspondents in letters) keep calling a new $10 monthly charge a “fee” or a “service charge.”  Therefore, said Lahm, “we have responded with the whole truth in this report as it is critical for people to understand that inflicting further pain on either consumers or small business owners is an absolutely reckless thing to do”:

Chase spokespersons as well as correspondence from Chase (and reports from consumers attempting to negotiate by phone) are insistent on calling a new $10 monthly charge, a “service charge,” but according to the change in terms notice: “The charge is $10 per month ($120 total annually), and it is a finance charge.”  Thus, the promotional rate has been violated.  Note that the founder of the CHANGEINTERMS.COM site pointed out to the CEO of Chase Card Services that, apparently, Chase had for once, made a mistake with its own “fine print.”

If an entrepreneur has a $20,000 “fixed APR Until the balance is paid in full” loan with Chase, which could be associated with the start-up costs for quite a variety of small businesses, what may have been a very manageable $400 per month payment skyrockets to $1000 per month with the newly imposed 5% of the balance per month calculation, “a crushing blow for a fledgling business at a time when we need to do everything we can possibly do as a society at large to nurture entrepreneurs, not annihilate them.”  The $600 increase could also cause the loss of a part-time employee or have a number of other ripple effects.  This example does not necessarily imply that the $20,000 charged to a personal credit card account was used for business purposes; it could be the case that the loan was used for living expenses, while the business was getting started and just beginning to realize cash flow.

Lahm added, “I think that one day this whole incident is going to become a classic textbook case study in failed leadership, ethics, and incompetency in management, and this present publication is useful to me as an outline as I work on this.  I believe that there are a whole lot of great ‘teaching moments’ at hand in this matter with Chase.  In my present line of work, this strikes me as something good — teaching future generations — coming from something very, very bad, with some horrible repercussions for a lot of innocent people who, by the way, have been meeting their payment obligations to Chase, and do not deserve this kind of treatment from a bank that’s also double-dipping and feasting on $25 billion of taxpayers’ bail out money.”


CHANGEINTERMS.COM is a consumer protest site, created by Dr. Robert Lahm, Jr. (a university entrepreneurship professor), in response to credit card companies and their mistreatment of many account holders (including himself).  Dr. Lahm’s research agenda includes entrepreneurial bootstrapping (which often involves the use of credit cards as a source of start-up capital), about which he has also addressed in previous testimony before Congress.  The site provides vibrant discussion and analysis, links to government, regulatory, and advocacy organizations, and sometimes more than a little sarcasm – along with serious critique – about the activities of credit card companies both individually, and as an industry.  While the site laments that it can’t actually change terms from a legal perspective, it submits terms and conditions can be changed with credit card companies from a consumer perspective.  Even with little help from current laws or regulators, consumers can still fight back.  The site declares in a message to credit card companies: