The American Financial Services Association, along with other financial-services trade groups, has expressed opposition to proposed legislation that seeks to impose a 10 percent annual percentage rate (APR) cap on credit cards. This proposal is being championed by Representatives Alexandria Ocasio-Cortez (D-NY) and Anna Paulina Luna (R-FL), with a corresponding bill in the Senate from Senators Bernie Sanders (I-VT) and Josh Hawley (R-MO).
In a letter addressed to the representatives, the association argues that "rate caps are misguided and would severely restrict the availability of this type of credit for consumers and effectively harm the very people the proposed legislation seeks to protect." The letter further warns: "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. 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 communication also emphasizes that interest rate caps could have adverse effects on high-risk borrowers. It states: "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. Lacking 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."
For those interested in further details about these concerns from financial services groups regarding this legislative proposal can refer to the full letter.