A new bipartisan bill introduced by a pair of senators would cap credit card interest rates in an effort to help consumers and fulfill one of President Donald Trump’s campaign promises.
Sens. Josh Hawley, R-Mo., and Bernie Sanders, I-Vt., introduced legislation that would cap credit interest rates at 10% immediately upon the bill’s enactment into law. The cap would then remain in effect for five years.
“During the campaign, President Trump pledged to cap credit card interest rates at 10%,” Sanders said in a statement. “Today, I am proud to be introducing bipartisan legislation with Senator Hawley to do just that.”Â
“When large financial institutions charge over 25% interest on credit cards, they are not engaged in the business of making credit available. They are engaged in extortion and loan sharking,” Sanders added. “We cannot continue to allow big banks to make huge profits ripping off the American people.”
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Credit card interest rates would be capped at 10% for five years under the Sanders-Hawley bill. (iStock / iStock)
Hawley said in a statement that capping credit card interest rates at 10% like Trump campaigned on “is a simple way to provide meaningful relief to working people.”
“Working Americans are drowning in record credit card debt while the biggest credit card issuers get richer and richer by hiking their interest rates to the moon,” Hawley added. “It’s not just wrong, it’s exploitative. And it needs to end.”
Sen. Josh Hawley, R-Mo., said that credit card issuers are being “exploitative” with interest rates. (Tom Williams-Pool/Getty Images / Getty Images)
In the last Congress, Hawley introduced a bill to cap credit card interest rates at 18%, though it died in committee without receiving a vote.
The press release from Sanders and Hawley noted that in September the Trump campaign said: “President Trump has promised to cap interest rates at 10% to provide temporary and immediate relief for hardworking Americans who are struggling to make ends meet and cannot afford hefty interest payments on top of the skyrocketing costs of mortgages, rent, groceries and gas.”
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Sen. Bernie Sanders, I-Vt., accused financial institutions with high credit card interest rates of “loan sharking.” (Kevin Dietsch/Getty Images / Getty Images)
Critics of proposals to cap credit card interest rates note that it would likely cause financial institutions to be more restrictive in extending credit and offering credit cards to borrowers with relatively poor credit scores, and potentially by reducing the credit card rewards they offer.
“There’s no question that a credit card rate cap would have a massive impact on credit cardholders beyond just reducing interest payments,” said Matt Schulz, chief credit analyst at LendingTree. “Banks have been vocal that a rate cap, even one much smaller than the 10% cap backed by President Trump, would lead to a dramatic reduction in credit card rewards and even to reduced access to credit for those with imperfect credit.”
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“However, it is also clear that most Americans are willing to accept both of those consequences if it means capping rates,” Schulz added, noting that a LendingTree survey from December found that two-thirds of cardholders would support a rate cap, even if it results in reduced rewards, while six in 10 support it even if it restricts access to credit for many.