Representatives Alexandria Ocasio-Cortez and Anna Paulina Luna have introduced bipartisan legislation to cap credit card interest rates at a maximum of 10 percent, a significant reduction from the current average rate of 21 percent. The bill aims to fulfill a campaign promise made by President Trump to protect working people from excessive debt caused by high interest rates. This move comes at a crucial time as Americans currently hold $1.21 trillion in credit card debt, with a significant portion in serious delinquency. The bill would provide temporary relief to consumers by capping rates for five years.
The legislation, known as H.R.1944, was introduced by Ocasio-Cortez and co-sponsored by Luna. It seeks to amend the Truth in Lending Act to immediately implement an interest rate cap of 10 percent until January 1, 2031. This bill directly challenges the substantial profits credit card companies have made at the expense of consumers, as rates have nearly doubled over the last decade. Senators Bernie Sanders and Josh Hawley have introduced similar legislation, highlighting a bipartisan effort to address high credit card interest rates and alleviate financial burdens on consumers.
While the bill has received support from lawmakers and public figures, financial experts and consumer advocates hold differing opinions on its potential implications. Critics argue that a rate cap could restrict credit availability, particularly for higher-risk consumers, potentially driving them towards less regulated and more predatory lending practices. John Cabell, managing director of payments intelligence at J.D. Power, warned that capping APRs for those with the highest interest rates could lead credit card issuers to stop offering products to these consumers in order to maintain profitability.
Representative Ocasio-Cortez emphasized the importance of protecting working people from falling into endless cycles of debt caused by high interest rates. Representative Paulina Luna highlighted the need for a fair solution to address the financial challenges faced by many Americans due to credit card debt. Ted Rossman, senior industry analyst at Bankrate, acknowledged that while a 10 percent cap may not be as profitable for lenders, access to credit remains vital for many households. These statements reflect the diverse perspectives on the impact of capping credit card interest rates.
The bill has been referred to the House Committee on Financial Services for further discussion and consideration. The outcome will depend on the legislative process and the ability of the sponsors to garner support from both lawmakers and the public. As the debate continues, stakeholders will assess the potential benefits and drawbacks of capping credit card interest rates at 10 percent, with a focus on balancing consumer protection with maintaining access to credit for those who need it.
