Sens. Bernie Sanders, I-Vt. and Josh Hawley, R-Mo. have introduced bipartisan legislation that could cap credit card interest rates at 10%.
The Senators said their bill, S. 381, would fulfill a commitment made by President Trump when he campaigned for president last year. The legislation—which has been proposed in past Congresses—would impose the cap through a change in the Truth in Lending Act. The Senators 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.”
“When large financial institutions charge over 25 percent interest on credit cards, they are not engaged in the business of making credit available,” Sen. Sanders said, in a statement. He added, “We cannot continue to allow big banks to make huge profits ripping off the American 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. It’s not just wrong, it’s exploitative,” Sen. Hawley said.
The Sanders-Hawley bill would immediately cap interest rates at 10%; the cap would be in effect for five years.
Banking trade groups immediately sent a letter to the Senators criticizing the proposal.
“By imposing government price controls on private products by creating an all-in annual percentage rate (APR) cap for credit cards at 10 percent, this legislation would severely restrict the availability of this type of credit for everyday consumers and effectively harm the very people the proposed legislation seeks to protect,” the groups wrote.
They added, “Many consumers who currently rely on credit cards would be forced to turn elsewhere for short-term financing needs, including pawn shops, auto title lenders, or worse– such as loan sharks, unregulated online lenders, and the black market.”
The groups signing the letter were: the American Bankers Association, the Consumer Bankers Association, the National Bankers Association, America’s Credit Unions, the Independent Community Bankers of America, the American Financial Services Association and the Bank Policy Institute.
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