Two Millennial congresswomen have become unlikely allies on legislation to cap credit card interest rates at 10% — a policy that President Trump previously pitched on the 2024 campaign trail.
Reps. Anna Paulina Luna (R-Fla.), 35, and Alexandria Ocasio-Cortez (D-NY), 35, who usually find themselves on opposite sides of issues, unveiled legislation Friday to immediately stop credit card interest rates from jumping above 10%.
“For too long, credit card companies have abused working class Americans with absurd interest rates, trapping them in an almost insurmountable amount of debt,” Lunda said in a statement.
“We need a fair solution – and that means getting rid of the status quo and putting a reasonable cap on interest rates.”
Sens. Bernie Sanders (I-Vt.) and Josh Hawley (R-Mo.) introduced cap legislation last month. Ocasio-Cortez has been involved with similar legislation in the past, including a 2019 bill to cap interest rates at 15%.
“Credit cards with high interest rates regularly trap working people in endless cycles of debt,” she argued. “At a time when families are struggling to make ends meet, we cannot allow big banks to shake down our communities for profit.”
The current average is nearly three times higher than their proposed limit — at 28.71%, according to Forbes.
Interest rates skyrocketed from around 15% during the red-hot inflation spurred by the COVID-19 pandemic and stimulus and have remained elevated since.
Credit card interest rates have never slipped to 10%, according to the Fed, whose dataset only goes back to 1994. The closest it got was during the 2008 Great Recession, when interest rates slipped to about 11.88%.
Critics argue that an artificial cap on credit card interest rates will lead to significant economic ramifications and prompt credit card companies to stop giving credit to millions of families.
“Government intervention prescribing the terms of a highly popular unsecured credit product would likely restrict or eliminate altogether the availability of this type of short-term revolving line of credit for millions of Americans who depend on this resource,” the American Bankers Association and 52 state banking groups wrote in a letter to Sanders and Hawley.
The groups cited examples in Oregon and Chile where similar policies are in place. They pointed to studies that suggested access to credit dropped.
“The evidence is clear: price controls, such as interest rate caps, harm consumers. Laws that prevent lenders from charging a market rate of return will lead to less lending,” they argued.
AOC and Luna noted that the Fed’s benchmark interest rate at which commercial banks loan and borrow reserves is between 4.25% to 4.50%, which is dramatically lower than credit card interest rates.
AOC, who reps parts of the Bronx and Queens, also stressed that Trump pushed for a 10% credit card interest rate cap.
“While working Americans catch up, we’re going to put a temporary cap on credit card interest rates,” Trump told a crow back in September. “We’re going to cap it at around 10%. We can’t let them make 25 and 30%.”
Experts in economics and finance overwhelmingly slammed the proposal.
“We have some good academic work that interest rate caps will lead to rationing for credit cards,” Arpit Gupta, an associate professor of finance at New York University, said. “What we don’t know is whether this may actually be a good thing for some low credit score borrowers in a behavioral debt trap.”
“Such a policy, though well meaning, will almost certainly lead to credit rationing whereby low-income borrowers get no credit at all,” C. Kirabo Jackson, an economist at Northwestern University, said. “A cap at 30% could be beneficial, but 10 is too low. To be clear, this is not just a hot take, research indicates this.”
So far, the legislation does not appear to have much traction in either chamber of Congress. It is unclear whether Trump will push for the cap now that he’s back in the White House.
