President Trump recently reignited a campaign promise to impose a 10% cap on credit card interest rates. This move could save Americans billions. However, not everyone is on board—big banks and credit card companies are raising their voices against it.
Trump didn’t clarify how he plans to implement this cap, whether through executive action or legislation. A Republican senator mentioned he would help draft a bill with Trump’s backing, aiming for the cap to start on January 20 of next year.
Opposition is expected. The banking industry argues that this cap could harm low-income individuals by limiting their access to credit, pushing them toward even costlier options like payday loans.
On his Truth Social account, Trump expressed his intent to protect consumers from exorbitant interest rates ranging from 20% to 30%.
Research conducted after this pledge suggested that a 10% cap could lead to annual savings of about $100 billion in interest for Americans. Although the credit card industry might face challenges, studies found it could still remain profitable, even if rewards programs scaled back.
Current statistics show that around 195 million Americans have credit cards, racking up $160 billion in interest fees, according to the Consumer Financial Protection Bureau. Total credit card debt in the U.S. hit approximately $1.23 trillion, reflecting a worrying trend.
Interest rates for credit cards now average between 19.65% and 21.5%, a significant increase from a decade ago when rates hovered around 12%. While rates have dipped recently, they are still near record levels since the mid-1990s.
Historically, the U.S. has imposed interest rate caps on specific demographics. For instance, the Military Lending Act prohibits charging active-duty service members more than 36% on financial products.
Some argue that a more affordable interest rate cap could still ensure profitability for banks. Brian Shearer, from the Vanderbilt Policy Accelerator, noted that major banks already make substantial profits from merchants, which could offset any losses from capping interest rates.
However, previous data suggests that lower interest caps might reduce access for those with lower credit scores. For example, Arkansas has a strict 17% interest cap, leading to fewer credit options for less creditworthy individuals.
As discussions around this proposal heat up, Senators Bernie Sanders and Josh Hawley have introduced legislation echoing Trump’s intentions, aiming for a five-year cap at 10%. Meanwhile, Representatives Alexandria Ocasio-Cortez and Anna Paulina Luna are working on similar measures, showcasing a rare moment of bipartisan agreement.
In summary, Trump’s proposal could significantly impact American consumers, but it faces staunch resistance. The debate promises to shape discussions on credit, consumer rights, and financial accessibility in the coming months.
For more insights on consumer credit, check out the Consumer Financial Protection Bureau report, which provides detailed market data.
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Legislation, Financial services, Politics, Business, Washington news, General news, Article, 129085369
