President Trump is looking for a ten% cap on bank card rates of interest for one yr, an concept that has drawn sturdy help from lawmakers in each events however pushback from card issuers.
“Please be told that we’ll not let the American Public be ‘ripped off’ by Credit score Card Corporations which are charging Curiosity Charges of 20 to 30%, and much more, which festered unimpeded in the course of the Sleepy Joe Biden Administration,” the president wrote on Fact Social late Friday.
Mr. Trump mentioned the cap on rates of interest ought to start on Jan. 20, 2026, or the one-year anniversary of his second inauguration.
Bank card rates of interest at present common over 20%, in line with Federal Reserve statistics, so a ten% cap would signify a big reduce in borrowing prices.
It is unclear if the president will try and implement his proposed 10% cap by some type of govt motion, or if his aim is to strain bank card issuers to slash their charges voluntarily. CBS Information has reached out to the White Home and among the largest bank card issuers within the U.S. for remark.
Supporters level to trillions in bank card debt
The concept of capping bank card rates of interest has drawn bipartisan help. Final yr, Republican Sen. Josh Hawley of Missouri and unbiased Sen. Bernie Sanders of Vermont, who caucuses with Democrats, teamed as much as introduce laws that will impose a ten% cap. The same measure was additionally launched within the Home by Democratic Rep. Alexandria Ocasio-Cortez of New York and Republican Rep. Anna Paulina Luna of Florida.
Different just lately proposed laws would impose much less stringent caps on charges and rates of interest.
Mr. Trump additionally known as for quickly capping rates of interest at 10% on the marketing campaign path. Hours earlier than the president’s late Friday Fact Social publish, Sanders criticized Mr. Trump on X for not following by on his pledge to restrict rates of interest.
Supporters of the thought say it could help scores of People who’re languishing beneath mountains of bank card debt, and argue that bank card issuers can afford to chop their charges.
People owed a complete of $1.23 trillion in bank card balances within the third quarter of final yr, the best stage on document, in line with the Federal Reserve Financial institution of New York. A 2024 examine by NerdWallet discovered that the typical U.S. family with bank card debt owed $10,563. In the meantime, the Shopper Monetary Safety Bureau present in 2023 that bank card charges have soared “far above the price of providing credit score.”
“We can’t proceed to permit large banks to make large income ripping off the American folks,” Sanders mentioned in a joint press launch with Hawley final yr.
Mentioned Luna: “For too lengthy, bank card firms have abused working class People with absurd rates of interest, trapping them in an virtually insurmountable quantity of debt.”
Opponents argue a bank card charge cap may backfire
However opponents of a cap, together with banks and different bank card issuers, warn that limits on rates of interest might power lenders to cease issuing bank cards to many riskier debtors.
A coalition of teams that signify banks — together with the American Bankers Affiliation and the Financial institution Coverage Institute — argued in an announcement to CBS Information on Friday {that a} 10% rate of interest cap “would cut back credit score availability and be devastating for hundreds of thousands of American households and small enterprise house owners who depend on and worth their bank cards, the very shoppers this proposal intends to assist.”
The Financial institution Coverage Institute estimated final yr that greater than 14 million American households that hardly ever pay their bank card balances in full may have their entry to credit score eradicated or curtailed by a ten% cap. Tens of millions of people that generally repay their balances may additionally face new restrictions, the group mentioned.
The American Bankers Affiliation has argued prior to now that if bank card issuers find yourself needing to chop off entry for “all however the lowest-risk prospects,” many people who find themselves in want of loans could be pressured to shift to “much less regulated alternate options” that usually cost even greater charges, like payday lenders and pawn outlets.
Billionaire investor Invoice Ackman, who backed Mr. Trump in his 2024 marketing campaign, known as the thought a “mistake.” He wrote on X that if card issuers are prevented from charging excessive sufficient rates of interest to cowl their losses and earn stable returns, “bank card lenders will cancel playing cards for hundreds of thousands of shoppers who should flip to mortgage sharks.”
Scott Simpson, CEO of the commerce group America’s Credit score Unions, instructed CBS Information in an announcement: “Whereas we admire the President’s want to extend affordability, the plain reality is that capping charges at 10% doesn’t make credit score extra reasonably priced, it makes it unattainable for hundreds of thousands of working People as a result of monetary establishments won’t be able to supply bank cards to most shoppers at a ten% charge.”
The Digital Funds Coalition — which represents bank card issuers and cost networks — mentioned “a one-size-fits-all 10% cap dangers making issues worse by decreasing entry to credit score and limiting alternative.”
Trump pledges to cope with affordability
The push to cap bank card rates of interest is the newest proposal by Mr. Trump to chop borrowing prices, as he grapples with widespread considerations about affordability.
Earlier this week, Mr. Trump directed the federal authorities to purchase $200 million in mortgage bonds utilizing money from Fannie Mae and Freddie Mac, in an effort to drive down mortgage charges.
The president has additionally urged the Federal Reserve to extra aggressively reduce its benchmark rate of interest, which influences borrowing prices for all the pieces from mortgages and automotive loans to industrial loans — although charge cuts by the Fed may run the danger of inflicting inflation to surge.
Mr. Trump is predicted to appoint a brand new Federal Reserve chair within the coming weeks, and instructed reporters final month he is “searching for someone that might be trustworthy with rates of interest.”
Emma Nicholson and Ryan Sprouse contributed to this report.
