In a bipartisan move aimed at financial reform, Representatives Alexandria Ocasio-Cortez and Anna Paulina Luna have introduced legislation that would cap credit card interest rates at a maximum of 10 percent.
The proposed cap is a stark reduction from current rates, which average around 21 percent, according to the St. Louis Fed.
“During his campaign, President Trump pledged to cap credit card interest rates at 10 percent. We’re making that pledge more than a talking point by introducing legislation to protect working people from remaining trapped under mountains of debt,” Ocasio-Cortez said in a press release.
Newsweek reached out to Representatives Alexandria Ocasio-Cortez and Anna Paulina Luna for comment via email on Monday.
Why It Matters
Echoing a campaign promise from Trump, the bill aims to realize a pledge that was touted as a solution to the debt many Americans face due to high credit card interest rates. By capping rates for around five years, the bill would provide a period of relief to consumers.
As of December 2024, Americans hold $1.21 trillion in credit card debt, an increase of $45 billion from September 2024, per New York Fed data. What’s more, 7.18 percent of U.S. credit card debt is in serious delinquency, meaning Americans are facing potential credit score damage, increased financial stress and the looming threat of collections.
What To Know
The legislation (H.R.1944) was introduced late last week by Ocasio-Cortez, a New York Democrat, and is co-sponsored by Luna, a Florida Republican. It would amend the Truth in Lending Act to immediately enforce an interest rate cap of 10 percent, directly challenging the substantial profits garnered by credit card companies at the expense of consumers.
In recent years, credit card companies have faced criticism for rates that have nearly doubled over the last decade, per CFPB findings highlighted in the bill’s press release.
This cap would last until January 1, 2031, according to the bill.
This bipartisan effort promises to shift the financial burden away from consumers, particularly those entangled in high-interest debt. The change is also supported by Senators Bernie Sanders and Josh Hawley, who introduced similar legislation (S.381) in early February.
Read more: Bernie Sanders Proposes Giving Donald Trump One of His Campaign Promises
Financial experts and consumer advocates are split on the implications of such a bill. Critics argue that a cap could restrict credit availability to higher-risk consumers, potentially driving them toward less regulated, more predatory lending practices.
“If you are forced to cap [APRs for] those with the highest interest rates, it would no longer make sense for the issuer to even offer them a product because it might not even be net positive from a revenue perspective,” John Cabell, managing director of payments intelligence at J.D. Power, told Fortune in early February.
What People Are Saying
Representative Alexandria Ocasio-Cortez, a New York Democrat, said in a press release: “Credit cards with high interest rates regularly trap working people in endless cycles of debt. At a time when families are struggling to make ends meet, we cannot allow big banks to shake down our communities for profit.”
Representative Anna Paulina Luna, a Florida Republican, said in a press release: “I’m proud to be the bipartisan co-lead to this legislation. For too long, credit card companies have abused working class Americans with absurd interest rates, trapping them in an almost insurmountable amount of debt. We need a fair solution – and that means getting rid of the status quo and putting a reasonable cap on interest rates.”
Ted Rossman, senior industry analyst at Bankrate, previously told Newsweek: “A 10 percent cap wouldn’t be nearly as profitable for lenders, so they wouldn’t do as much lending. And while I don’t want people to pay 20 or 30 percent interest rates, it’s important to note that access to credit is vital for many households.”
What Happens Next
The bill was referred to the House Committee on Financial Services last Thursday. As discussions progress, the outcome will largely depend on the legislative process and the ability of its sponsors to rally enough support both from lawmakers and the public.