A House bill that would cap credit cards’ annual percentage rate at 10% would severely restrict the availability of such credit to many consumers, the American Bankers Association and seven financial sector associations said today in a joint letter to the bill’s sponsors.
The 10% Credit Card Interest Rate Cap Act has been introduced in the House [H.R. 1944] by Reps. Alexandria Ocasio-Cortez (D-N.Y.) and Anna Paulina Luna (R-Fla.) and in the Senate [S. 381] by Sens. Bernie Sanders (I-Vt.) and Josh Hawley (R-Mo.). ABA had previously expressed concerns about the Senate version. In the joint letter, ABA joined with other associations in raising the same concerns about the House bill, saying it would harm the very people it seeks to protect.
“This bill would eliminate access to credit cards for millions of consumers and drive them to sources of credit which are far more costly and less regulated,” the associations said. “Many consumers who currently rely on credit cards would be forced to turn elsewhere for short-term financing needs, including pawn shops, auto title lenders or worse — such as loan sharks, unregulated online lenders and the black market. Many Americans already use payday loans which can charge annual interest rates of more than 300%, and this legislation would direct more consumers to use these sources of credit which are far more expensive than credit cards.”
“As responsible and well-regulated financial institutions, we share the goals of reducing the cost of consumer credit and increasing financial inclusion,” the associations added. “Unfortunately, the 10% rate cap proposed in this legislation would stifle our shared financial inclusion goals, reduce access to credit and push consumers to far more costly and less regulated lenders.”
