Credit Rate Cap Folly
The American Financial Services Association joined other leading financial-services trade groups in sending a letter to Reps. Alexandria Ocasio-Cortez (D-NY) and Anna Paulina Luna (R-FL) opposing their legislation that would impose a 10 percent annual percentage rate (APR) cap for credit cards. This is a companion bill to a Senate proposal from Sens. Bernie Sanders (I-VT) and Josh Hawley (R-MO)
As we note in the letter – and continue to reinforce in discussions with policymakers and in other advocacy and communications efforts – rate caps are misguided and would severely restrict the availability of this type of credit for consumers and effectively harm the very people the proposed legislation seeks to protect. The letter notes:
“This bill would eliminate access to credit cards for millions of consumers and drive them to sources of credit which are far more costly and less regulated. Many consumers who currently rely on credit cards would be forced to turn elsewhere for short-term financing needs, including pawn shops, auto title lenders, or worse – such as loan sharks, unregulated online lenders, and the black market.”
The letter also highlights how interest rate caps hurt consumers and have disproportionate negative effects on high‐risk borrowers, the exact population they are intended to help:
“Other research demonstrates that when consumers lose access to credit, they often reduce spending on essentials such as healthcare, education, and food, and are more likely to fall behind on bill, mortgage, and rent payments. Lacking a credit card would also likely reduce their consumption of items like furniture and clothing which not only negatively affects consumers, but also negatively affects the broader economy.”
Read the full letter here.
March 12th, 2025
