Joint Trades Sound Alarm
AFSA joined seven other leading financial services trade associations on a letter to Sen. Josh Hawley (R-MO) expressing concern about the Capping Credit Card Interest Rates Act (S.2760), which would cap credit cards’ APR at 18%.
The letter signed by associations representing banks, credit unions, think tanks and non-bank financial institutions noted that the bill if signed into law would severely restrict credit access for Americans of all economic tiers, but especially those in the subprime space. The arbitrary 18% APR cap would also include fees and add-on products, further restricting financial institutions’ ability to serve their customers with products that help them meet their financial goals.
Interest rates allow financial institutions to price credit based on risk expanding availability. The APR includes the cost of underwriting, compliance, IT, and administration costs, as well as the cost of recovering losses.
The trades say the proposal would force consumers to seek credit through less secure, often predatory products. The Consumer Financial Protection Bureau’s (CFPB) recent rule arbitrarily capping credit card late fees compounds this issue, forcing even more Americans out of safe, reliable credit products.
The signatories of the letter concluded by reiterating a shared commitment to reducing consumer debt while simultaneously protecting access: “This goal can be achieved without creating barriers for accessing safe and affordable credit products by pushing consumers with troubled credit histories and those on the financial fringe outside of highly regulated financial products to far more costly and less regulated lenders.”
September 20th, 2023 by Dan Bucherer