Bipartisan legislation seeking to establish a five-year annual percentage rate (APR) cap for credit cards met with strong pushback from organizations representing banks and credit unions. The bill aligns with a campaign promise by President Donald Trump calling for a 10 percent cap on credit card interest rates.
Sens. Bernie Sanders (D-Vt.) and Josh Hawley (R-Mo.) introduced the measure in an effort to ease credit card debt for consumers.
“Working Americans are drowning in record credit card debt while the biggest credit card issuers get richer and richer by hiking their interest rates to the moon. It’s not just wrong, it’s exploitative. And it needs to end,” Hawley said in a statement. “Capping credit card interest rates at 10 percent, just like President Trump campaigned on, is a simple way to provide meaningful relief to working people. Let’s do it.”
“During the campaign, President Trump pledged to cap credit card interest rates at 10 percent,” Sanders said. “Today, I am proud to be introducing bipartisan legislation with Senator. Hawley to do just that. When large financial institutions charge over 25 percent interest on credit cards, they are not engaged in the business of making credit available. They are engaged in extortion and loan sharking. We cannot continue to allow big banks to make huge profits ripping off the American people. This legislation will provide working families struggling to pay their bills with desperately needed financial relief.”
The average U.S. credit card interest rate on accounts with balances that accrued interest was 22.8 percent in November 2024, according to the Federal Reserve.
Seven financial trade organizations expressed opposition to the legislation in a letter to key lawmakers, arguing the measure would severely restrict credit availability.
“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 trade groups wrote.
The trade advocates cited research indicating interest rate caps can be detrimental to consumers’ financial health and, by extension, the economy as well.
As an example, the trades described the unintended harm caused by a state-initiated rate cap imposed in Illinois. Research conducted by the Federal Reserve revealed that the “cap decreased the number of loans to subprime borrowers by 38 percent.”
Another study by Dartmouth found that a similar 36 percent all-in APR cap in Oregon was responsible for “restricting access that caused deterioration in the overall financial condition of Oregon households,” the trades wrote.
“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,” the trades continued. “Lack of 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.”
The trades emphasized that they share the senators’ goals of reducing the cost of consumer credit and increasing financial inclusion by supporting “responsible and well-regulated financial institutions.”
“Unfortunately, the 10 percent rate cap proposed in this legislation would stifle our shared financial inclusion goals, reduce access to credit, and push consumers to far more costly and less regulated lenders,” the trades concluded.
The letter was signed by the American Bankers Association, America’s Credit Unions, the American Financial Services Association, the Bank Policy Institute, the Consumer Bankers Association, the Independent Community Bankers of America, and the National Bankers Association.