Recently, President Trump told the credit card industry to lower interest rates to 10% by January 20. But it’s unclear how serious he is or what he plans to do if they don’t comply. White House Press Secretary Karoline Leavitt mentioned that the president expects the companies to meet this demand, but specifics on consequences haven’t been shared.
A study found that if credit card rates were capped at 10%, Americans could save about $100 billion in interest annually. While this would hurt credit card companies, they would likely still make a profit, although perks like rewards programs might be reduced. This research has been highlighted by the White House on social media.
Bank lobbyists are trying to decipher the administration’s plans. There have been proposals in Congress to cap interest rates, but key Republican leaders are not supportive. Additionally, the Dodd-Frank Act, created after the 2008 financial crisis, prevents one federal regulator from enforcing such limits.
Trump may choose to apply political pressure on the credit card industry, similar to his actions with other sectors, such as pharmaceuticals and tech manufacturing. Many banks have benefited from a deregulatory environment under his administration, which has led to significant tax cuts and increased investment banking activities.
Bank representatives express mixed reactions. While some, like JPMorgan’s CFO Jeffrey Barnum, vowed to fight against the cap, others, including Citigroup’s CFO Mark Mason, acknowledge the importance of affordability and express a willingness to collaborate with the administration.
In a surprise move, fintech company Bilt recently launched credit cards with an introductory 10% interest rate for the first year. This suggests that the credit card industry may adapt to meet the administration’s demands without drastically changing their business models. Bilt’s CEO, Ankur Jain, stated they want to lead if rate caps are enforced.
As the deadline approaches, uncertainty surrounds the future of credit card rates and the potential impact on consumers and the industry. Keeping an eye on developments in this area will be crucial for both consumers and policymakers.
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