WASHINGTON (Gray DC) – Two senators have introduced a bill that aims to fulfill one of President Donald Trump’s campaign trail pledges, a cap on credit card interest rates.
Sen. Josh Hawley (R-MO) and Sen. Bernie Sanders (I-VT) announced the bill bill last week, the 10 Percent Credit Card Interest Rate Cap Act. If passed, it would dramatically lower credit card interest rates, which currently average 22.80% APR, according to the latest numbers from the Federal Reserve.
“These credit card companies and the big banks who work with them have never made more money, ever in American history. We need to stop this. It’s predatory lending is what it is,” said Sen. Hawley.
The president spoke about capping credit card rates at a campaign rally last fall in Uniondale, N.Y. on Sep. 18.
“We’re going to put a temporary cap on credit card interest rates. We’re going to cap it around ten percent. We can’t let them make 25 and 30 precent,” said President Trump.
It is not clear if the president supports the legislation. Sen. Hawley said he spoke to Trump about the bill and hopes he will get behind it.
A report from the Federal Reserve Bank of New York released in November found that Americans collectively owe $1.17 trillion on their credit cards.
“When large financial institutions charge over 25 percent interest on credit cards, they are not engaged in the business of making credit available. They are engaged in extortion and loan sharking,” said Sen. Sanders in a press release about the bill. “We cannot continue to allow big banks to make huge profits ripping off the American people. This legislation will provide working families struggling to pay their bills with desperately needed financial relief.”
Banking groups like Consumer Bankers Association have said that the bill would hurt consumers.
“An all-in APR cap is the best way to make sure that every cardholder’s costs go up and that people with an 800 or below credit score don’t have access to credit cards. It is a terrible idea,” said Lindsey Johnson, the president and CEO of the association.
Johnson pointed out that credit card interest rate cap bills have been introduced several times in Congress and have failed.
“They usually don’t go anywhere because it doesn’t take very long at all to point to historical data and evidence that shows how much harm comes to consumers,” she said.
The Congressional Research Service found some studies indicating that interest rate caps have resulted in declines to access to credit. But it also found arguments from economists who said that caps could beneficial for some people by preventing them from taking out costly forms of credit.
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