A Senate bill that would set an all-in annual percentage rate cap for credit cards at 18% would severely restrict card availability for everyday consumers and harm the very people it seeks to protect, the American Bankers Association and seven bank and credit union associations said today. In a letter to bill sponsor Sen. Josh Hawley (R-Mo.), the groups expressed their opposition to the bill—the Capping Credit Card Interest Rates Act—and any attempt to amend it to an unrelated short-term government funding bill.
“[The bill] would not only cap credit card interest rates, but would also include all associated fees, penalties, and add-on products, such as warranties, in its arbitrary ‘all-in’ APR calculation,” the associations said. “Including annual fees and other fees in the calculation will cause credit cards to exceed the cap, resulting in the elimination or reduction of valuable credit card features like cash back and other rewards. This cap will also impede innovative credit cards with non-credit features designed to attract underserved groups because even a nominal annual fee could result in an all-in rate that exceeds the cap.”
Regulated financial institutions that issue credit cards to their customers already protect consumers and comply with numerous regulations and requirements, the associations said. The bill’s stated goal of reducing consumer debt “can be achieved without creating barriers for accessing safe and affordable credit products by pushing consumers with troubled credit histories and those on the financial fringe outside of highly regulated financial products to far more costly and less regulated lenders.”