Two senators from opposing parties propose a credit card interest rate cap, potentially benefiting consumers but facing strong opposition from the financial industry.
A bipartisan effort in Congress has materialized with an unlikely duo of senators, Bernie Sanders (I-Vt.) and Josh Hawley (R-Mo.), aiming to impose a cap on credit card interest rates. Their proposed legislation seeks to limit these rates to 10% for a five-year period following enactment. The senators frame this measure as a fulfillment of a campaign pledge made by President Donald Trump, leveraging his past statements on the issue.
This bill's introduction, coupled with the White House's potential support, could propel it forward. However, the path to enactment is long and fraught with potential consequences.Matt Schulz, chief credit analyst at LendingTree, acknowledges that credit card rate caps have historically faced significant opposition. Despite this, he points to public polls indicating strong support for such caps, even if it means curtailed access to credit and reduced credit card rewards. Schulz believes this proposal, while still a long shot, has gained political momentum and might be the most viable time for it to materialize. He suggests that a cap at 18%, similar to federally chartered credit unions, or even 20%, would be more realistic and beneficial for consumers grappling with credit card debt.The financial services industry, represented by prominent trade groups, has vehemently opposed the proposed 10% cap. Organizations like the Consumer Bankers Association, America's Credit Unions, and the American Financial Services Association argue that government-mandated APR caps would ultimately harm consumers by limiting access to credit cards. They cite economic research indicating that such caps would drive individuals towards more expensive and less regulated credit sources. The groups also point to the experiences of Illinois and Oregon, where credit card rate caps resulted in decreased loan availability for subprime borrowers and, overall, a deterioration in the financial well-being of households. Despite the challenges, Schulz encourages consumers to explore options for lowering their interest rates independently. He suggests pursuing 0% balance transfer cards, considering low-interest personal loans, and even contacting credit card issuers to negotiate lower rates. LendingTree's research shows that a significant portion of individuals who request lower rates successfully secure them, highlighting the potential for consumers to take proactive steps in managing their credit card debt
CREDIT CARD RATES LEGISLATION CONSUMER PROTECTION FINANCIAL INDUSTRY INTEREST RATES
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