A bipartisan credit card interest cap bill has sparked significant debate over if the bill amounts to “debanking on steroids” or if it provides “meaningful relief to working people.”
On Tuesday, Sens. Josh Hawley (R-MO) and Bernie Sanders (I-VT) introduced legislation that would cap credit card interest rates at ten percent for five years. This follows remarks from then-candidate Donald Trump in September when he floated capping interest rates at ten percent.
“While working Americans catch up, we’re going to put a temporary cap on credit card
interest rates,” Trump said at a campaign rally in Long Island. “We’re going to cap it at around 10%. We can’t let them make 25 and 30%.”
The average credit card interest rate exceeds 20 percent, according to BankRate, and has risen over the past decade.
“We cannot continue to allow big banks to rip off Americans by charging outrageously high credit card interest rates,” Sanders said in a statement to the New York Times.
Although the proposal has bipartisan support, Republicans and libertarian policymakers, as well as industry insiders, believe that the cap is “unworkable” and would limit Americans’ access to credit.
One industry insider said that the proposal amounts to “debanking on steroids” and said that roughly 100 million Americans’ credit cards could be at risk due to the proposal.
This proposal was introduced as the House and Senate have discussed how government policies have pushed financial institutions to deplatform conservatives and others deemed too risky to service.
Those opposed to interest rate caps believe that it raises the cost 0f borrowing and ultimately restricts access to credit for from those that need it most.
One World Bank report found that at least 76 countries have some form of interest rate caps on loans and concludes that there are more effective methods of protecting consumers, such as improved consumer protection frameworks, disclosure of interest rates, and other proposals.
An American Bankers Association (ABA) report found that a 15 percent interest rate proposal would lead to 95 percent of subprime borrowers losing access to credit cards under 15 percent.
The industry insider said, “Not even the Swedes are crazy enough to do this.”
The insider added that it would help destroy Trump’s “golden age” by reducing access to credit.
Lindsey Johnson, the president and CEO of the Consumer Bankers Association, said in a statement to Breitbart News:
Price-setting is political pandering that has, time and time again, proven to harm Americans. Research clearly shows that when politicians, rather than the free market, dictate prices, consumers ultimately pay the price through limited choices outside the well-regulated banking system. For example, one in nine Missourians already uses payday loans, almost double the national average. Those consumers pay annual interest rates of more than 300 percent because of their lack of access to bank credit. Given these stats, it’s surprising that Senator Hawley would partner with an avowed socialist on financial policy to push consumers further out of the banking system.
Those in favor of capping interest rates believe that it would serve as financial relief to those who have been suffering from the recent economic turmoil.
The Sanders-Hawley bill was unveiled as a Forbes report found that the average credit card rate is 28.6 percent, even though banks can borrow from the Federal Reserve at 4.5 percent. The release about the bill also stated that high interest rates and fees have allowed credit card companies to make significant profits at the expense of the average American.
Credit card delinquencies are now rising again since their post-pandemic low in the third quarter of 2021.
“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. And it needs to end,” Hawley said in a statement on Tuesday when unveil his and Sanders’s bill.
“Capping credit card interest rates at 10%, just like President Trump campaigned on, is a simple way to provide meaningful relief to working people. Let’s do it.”
Sean Moran is a policy reporter for Breitbart News. Follow him on X @SeanMoran3.
