Another Misguided APR Bill
Media reports indicate that Sen. Josh Hawley (R-MO) will introduce legislation that would cap consumer credit card annual interest percentage rates (APR) at 18 percent. This is a misguided effort at populist politics that will harm the very people Senator Hawley claims to want to help.
In explaining his decision to join the ranks of Sen. Bernie Sanders (I-VT) and Rep. Alexandria Ocasio-Cortez (D-NY) with proposals to hinder segments of American consumers’ access to credit, Senator Hawley points out, “The government was quick to bail out the banks just this spring but has ignored working people struggling to get ahead.”
But a proposal to cap credit card rates would create a wider credit gap among consumers, as well as tiers of credit “haves” and “have-nots”: those consumers who can qualify for the capped credit rate and those with less than stellar credit who cannot qualify for such credit options.
There is already significant public opposition to rate caps in their different forms. And, more broadly, there are independent academic studies and surveys released over the past several years that have confirmed that rate caps do not help consumers who need credit the most. Ironically, one recent independent studied compared the failed rate cap policies of Illinois to a more successful model in Missouri.
Senator Hawley is correct in focusing on the economic plight of American households, that on average have seen monthly expenses for food, gas and other necessities spike on average about $700 more per month. But reducing options for consumer credit lenders – whether credit cards, traditional installment loans, or other safe and ethical credit products – that will limit consumer choices and credit opportunities is not the way to solve fundamental economic issues in the U.S. economy.
AFSA remains committed to working with Congress and the Administration on responsible, pro-consumer policies that both protect consumers and expand their financial opportunities. AFSA also continues its outreach to Members of Congress and their staff to reinforce the important role consumer credit lenders play for our members’ customers – and their constituents – in the U.S. economy.
September 11th, 2023 by AFSA