Republican lawmaker proposes 18% cap on credit card interest rates

Credit card companies should be barred from setting interest rates higher than 18%, a Republican lawmaker from Missouri proposed Tuesday. 

If passed, U.S. Senator Josh Hawley’s bill — the Capping Credit Card Interest Rates Act — would also block credit card companies from introducing new fees aimed at evading the cap and penalize lenders with annual percentage rates (APRs) that exceed 18%. 

Hawley’s bill comes as Americans are grappling with record-high credit card rates while carrying slightly more than $1 trillion in card debt. The average credit card rate has been inching toward 21% for the past three months and was 20.68% as of last week, making it more expensive for consumers to carry balances, according to Bankrate data

Hawley’s office didn’t immediately respond to a request for comment. In a statement, Hawley said Americans are “being crushed” by credit card debt while financial institutions are enjoying larger profits. 

“The government was quick to bail out the banks just this spring, but has ignored working people struggling to get ahead,” he said, referring to Silicon Valley Bank and other regional banks that collapsed earlier this year, prompting the federal government to step in. “Capping the maximum credit card interest rate is fair, common-sense, and gives the working class a chance.”

Higher prices for food, clothing and housing — due to inflation — have forced many Americans to lean more heavily on their credit cards to purchase everyday items. Americans have all but tapped out their savings, and some have shifted their attitudes toward using a credit card from only emergencies to a daily necessity.

Some card users say they can’t afford to pay off their full statement every month, one survey found, which also can push their total balance higher.

Bernie Sanders’ 15% cap proposal

While Hawley’s bill has little chance of passing, he’s using the proposal as a political strategy to further cement himself as a conservative populist, Wall Street analysts said Tuesday. At best, the Senate Banking Committee may bring it to a vote just to get Republican lawmakers on the record as opposing the measure, Jaret Seiberg, an analyst at TD Cowen, said in a research note Tuesday.

“This is part of a broader populist attack on risk-based pricing,” Seiberg said. “The argument is that it is fundamentally unfair for those with the most to pay the least for credit.”

Matt Schulz, credit analyst at LendingTree, also said the bill will face tough opposition in Congress. He noted that Senator Bernie Sanders, an independent from Vermont, and Representative Alexandria Ocasio-Cortez, a Democrat from New York, proposed a 15% cap on interest rates in 2019, only to see the measure lose momentum.  

“These types of proposals, though they have little chance of becoming law, are useful on the campaign trail in providing the candidate another talking point about how they are fighting for the consumer,” Schulz told CBS MoneyWatch. “That type of message is always popular, but perhaps even more so in a time of record credit card debt and sky-high interest rates.”

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