Trump urges Congress to enact 10% credit card interest rate cap

President Trump Calls for Credit Card Rate Cap

President Donald Trump recently urged lawmakers to pass legislation that would limit credit card interest rates to 10%. This move comes after his social media post earlier this month, in which he encouraged banks to voluntarily lower their rates. Speaking at the World Economic Forum in Davos, Switzerland, Trump emphasized the need for this cap, stating that it would help millions of Americans save for a home.

Trump’s comments highlighted the exorbitant interest rates charged by some banks, with rates as high as 28%, 30%, 31%, and 32%. He questioned the legitimacy of such rates, asking, “Whatever happened to usury?” The president’s remarks were met with a positive response from the banking sector, with shares of banks climbing after his comments. The KBW Bank Index rose 2.2% in morning trading, while Capital One, which relies heavily on credit cards for revenue, advanced 1.9%.

Legislative Path and Industry Response

The Trump administration’s decision to pursue a legislative path to cap credit card rates may be the least threatening approach for the industry. A bill introduced by Sens. Josh Hawley and Bernie Sanders last year, which proposed a 10% cap on card APRs for five years, has stalled in Congress. Analysts, including Sanjay Sakhrani of KBW, believe that the likelihood of a card bill gaining enough bipartisan support to become law is low. Republican lawmakers, including House Speaker Mike Johnson, have expressed caution regarding card price controls.

Despite the uncertainty surrounding the proposal’s chances of passing, Trump’s influence among GOP lawmakers could potentially improve its prospects. However, it is unclear whether the president’s pressure will be enough to sway lawmakers. The episode may demonstrate the limits of Trump’s ability to persuade the financial industry to voluntarily give up billions of dollars in revenue to support his election-year affordability push.

Industry Concerns and Counterarguments

After Trump’s initial social media post, banks expressed concerns that a rate cap would have unintended consequences, such as lenders canceling accounts for many card customers, particularly those with lower credit scores. The president claimed that lenders who didn’t comply with the rate cap would be “in violation of the law,” but bankers countered that they were already compliant with existing laws. Privately, bankers and their lobbyists hope to fend off the president’s request, given the difficulty of passing legislation.

JPMorgan Chase CEO Jamie Dimon suggested that the U.S. government should test the rate cap in two states, Vermont and Massachusetts, to demonstrate the potential consequences of price controls. Dimon argued that such a move would be an “economic disaster,” leading to a drastic reduction in the credit card business for 80% of Americans.