A proposed bill to create an all-in annual percentage rate cap of 10% for credit cards would harm the very people it seeks to protect, the American Bankers Association and six banking and credit union associations said today in a joint letter to the bill’s sponsors.
The bill by Sens. Bernie Sanders (I-Vt.) and Josh Hawley (R-Mo.) would implement a proposal made by President Trump during his campaign for office. Trump has not endorsed the legislation, but Sanders and Hawley claim the rate cap would “provide temporary and immediate relief for hardworking Americans.”
In their letter, the associations argued the opposite is true. A 10% rate cap would severely restrict credit card availability for many consumers, forcing them to turn to elsewhere for short-term financing needs, “including pawn shops, auto title lenders or worse,” the groups said.
“Other research demonstrates that when consumers lose access to credit, they often reduce spending on essentials such as healthcare, education and food, and are more likely to fall behind on bill, mortgage and rent payments,” the associations said. “Lack of a credit card would also likely reduce their consumption of items like furniture and clothing which not only negatively affects consumers, but also negatively affects the broader economy.”
