Leading financial organizations, representing a wide range of banks and credit unions, along with the payments and fintech sectors, have voiced their opposition to proposed legislation that would cap the annual percentage rate (APR) for credit cards at 10 percent. This initiative is spearheaded by Representatives Alexandria Ocasio-Cortez (D-N.Y.) and Anna Paulina Luna (R-Fla.), with corresponding support from Senators Bernie Sanders (I-Vt.) and Josh Hawley (R-Mo.).
In a letter addressed to the representatives, these groups argue that the legislation would significantly limit access to credit for many consumers. They assert that this could drive individuals toward more expensive and less regulated credit options. The letter states: “This bill would eliminate access to credit cards for millions of consumers and drive them to sources of credit which are far more costly and less regulated.”
The letter also emphasizes the role of credit cards in promoting financial inclusion through underwriting innovations. It notes: “Credit cards bring more consumers into the well-regulated credit markets than ever before through underwriting innovations that offer credit to previously ‘credit invisible’ consumers and deep subprime consumers.”
Furthermore, the letter discusses potential negative impacts on high-risk borrowers, arguing that interest rate caps can lead to reduced spending on essential items like healthcare, education, and food. The document warns: “Other research demonstrates that when consumers lose access to credit, they often reduce spending on essentials such as healthcare, education, and food.”
The Bank Policy Institute describes itself as a nonpartisan entity focusing on public policy research and advocacy related to banking regulations.
For further information or inquiries regarding this matter, contact details for various representatives from involved organizations are provided.