Photographer: Michael Nagle/Bloomberg
(Bloomberg) — US President Donald Trump said he would ask Congress to implement his proposal to cap credit card interest rates at 10% for one year, a policy that’s drawn pushback from some of the biggest banks and card issuers.
“I’m asking Congress to cap credit card interest rates at 10% for one year and this will help millions of Americans save for a home,” Trump said Wednesday in a speech at the World Economic Forum in Davos, Switzerland.
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Earlier this month, Trump took aim at credit card interest rates, posting on social media that he would call for a one-year cap. That sent the financial industry racing to figure out how to respond with little clarity on how Trump would implement the policy.
JPMorgan CEO Dimon Says Credit Card Cap Would Be ‘Economic Disaster’
Bank executives have fought back against the policy. Before Trump’s speech on Wednesday, JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said the move would spell “economic disaster” for the US, causing many lenders to pull credit lines for consumers.
Trump’s comments on Wednesday “felt like a dialing down of the substance even if the style was pure Trump,” said Brian Jacobsen, chief economic strategist at Annex Wealth Management. “He didn’t say he’d cap credit card rates, instead asking Congress to do it.”
A congressional proposal may be more susceptible to resistance as compared with an executive order, though it’s not exactly clear what legal authority the White House could tap to issue such a mandate, according to people familiar with the matter. The path through Congress is still uncertain, they said, asking not to be named discussing non-public information.
Such a measure would require widespread congressional support. Last week, Senate Majority Leader John Thune said capping the rates “would probably deprive an awful lot of people of access to credit around the country.” House Speaker Mike Johnson, a Republican from Louisiana, said it would take work to resolve differences over the proposal.
Citigroup Inc. CEO Jane Fraser said on CNBC Tuesday that she doesn’t think there’s a realistic chance of bipartisan support for a credit card cap in Congress.
The industry is arguing that limiting the rate on credit cards, a type of unsecured debt, will force banks to effectively stop extending credit to consumers with worse credit scores. If a 10% rate cap is implemented, as many as 88% of open credit card accounts may lose access to credit, according to a recent study published by the Electronic Payments Coalition, a financial-services lobbying group.
Capitol Hill
Consumer advocates, however, have said that Wall Street is profiting from the high interest rates that are hurting Americans at a time when affordability has worsened across the country.
“If the president is serious about helping families, he needs his Republican allies in Congress to make this a top priority and stand up to the executives and lobbyists trying to protect banks’ bottom lines,” Mike Pierce, executive director of Protect Borrowers, said in an emailed statement Wednesday.
Banks and payment firms are no strangers to Capitol Hill. They’ve long battled attempts to chip away at interchange fees, or the costs merchants must pay to accept credit cards. A bipartisan measure known as the Credit Card Competition Act would require banks to offer retailers the ability to bypass dominant payment networks Visa Inc. and Mastercard Inc. for transactions.
Some lawmakers have said the bill would help lower costs for consumers, but Congress hasn’t successfully passed the legislation after years of debate. Last week, Trump called on lawmakers to support that legislation.
–With assistance from Steven T. Dennis and Todd Gillespie.
(Updates with consumer advocate comment starting in 10th paragraph.)
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