Trump Urges Congress to Limit Credit Card Rates to 10%
US President Donald Trump has proposed a significant change to credit card interest rates, urging Congress to limit them to 10% for one year. This initiative aims to alleviate financial burdens for many Americans, particularly those trying to save for a home. Trump made this announcement during a speech at the World Economic Forum in Davos, Switzerland.
Background on the Proposal
Earlier this month, Trump revealed his intention to call for a one-year cap on credit card interest rates through social media. This directive has stirred considerable debate within the financial sector, prompting major banks to assess its potential impacts.
Industry Pushback
- JPMorgan CEO Jamie Dimon described the cap as an “economic disaster,” predicting that it could lead to reduced credit availability.
- Senate Majority Leader John Thune warned that capping rates could restrict access to credit for many consumers.
- Citigroup’s CEO, Jane Fraser, expressed skepticism about the likelihood of bipartisan support for such a measure.
According to a study by the Electronic Payments Coalition, if a 10% interest rate cap is enacted, approximately 88% of open credit card accounts could lose access to credit. Bank executives argue that limiting interest rates on unsecured debt like credit cards could compel lenders to withdraw credit from individuals with lower credit scores.
Congressional Challenges
The path to implementing this proposal through Congress is complex. Legislative measures require substantial support, and dissent exists within both parties regarding its potential effects. Some lawmakers have suggested that the cap might constrain many consumers from accessing necessary credit.
Trump’s proposal differs from a potential executive order, which could face fewer obstacles. The legal framework for enforcing such a cap remains ambiguous, complicating its feasibility.
Consumer Advocacy Perspective
Consumer advocates argue that high credit card interest rates disproportionately harm Americans, particularly amid rising living costs. Mike Pierce, executive director of Protect Borrowers, emphasized the importance of making this issue a congressional priority to protect families.
Future Legislative Efforts
Trump has also called for support of the Credit Card Competition Act. This bipartisan measure aims to lower consumer costs by enabling retailers to circumvent dominant payment networks like Visa and Mastercard.
Despite past attempts to address these issues, Congress has yet to pass significant legislation. The ongoing discussions surrounding credit card rate caps and competition highlight the tension between financial institutions and consumer advocates.
