President Donald Trump on Wednesday urged U.S. lawmakers to pass legislation to cap credit card rates at 10%, following his social media post this month ordering banks to voluntarily lower rates.
“I’m asking Congress to cap credit card interest rates at 10 percent for one year, and that will help millions of Americans save for a home,” Trump said from the World Economic Forum in Davos, Switzerland.
“They’re charging Americans interest rates of 28%, 30%, 31%, 32%,” Trump said. “What happened to usury?”
Bank stocks rose after the comments. THE KBW Bank Index rose 2.2% in morning trading. Capital onewhich depends on cards for most of its revenue, grew by 1.9%.
Of the options the Trump administration had for pressuring U.S. banks over card fees, the legislative route may be the least threatening to the industry. Sens. Josh Hawley, R-Mo., and Bernie Sanders, I-Vt., introduced a bill last year that would limit card APRs to 10 percent for five years, but that proposal has stalled in Congress.
Analysts, including KBW’s Sanjay Sakhrani, said it was unlikely a card bill would have enough bipartisan support to become law. Lawmakers from Trump’s Republican Party, including House Speaker Mike Johnson, have expressed caution about card price controls.
“If this is the way forward, the chances of implementation are low,” Sakhrani said in an interview. “Many Republican leaders oppose this idea” and other industries, including airlines and retailers, would be affected by the policy.
It’s unclear whether pressure from Trump — who wields considerable influence among Republican lawmakers — will improve the plan’s chances of passage.
Breaking the law?
The episode could show the limits of Trump’s ability to convince the financial industry to voluntarily give up billions of dollars in revenue to support his election-year affordability campaign.
After Trump’s Jan. 9 Truth Social post about the rate cap, banks said in earnings conference calls that such a limit would have unintended consequences, including that lenders would simply cancel the accounts of many cardholder customers, particularly those with lower credit scores.
The president told reporters that lenders who failed to meet rates would be “in violation of the law,” but behind closed doors, bankers countered that they were already complying with the law.
Privately, bankers and their lobbyists told CNBC they hoped to rebuff the president’s request, given the difficulty of passing legislation.
Several major credit card lenders contacted by CNBC on Tuesday said they had not made any changes to their interest rates, but they all declined to be identified. KBW’s Sakhrani said he is not aware of any major card players that have reduced their rates.
Wednesday, JPMorgan Chase CEO Jamie Dimon told an audience in Davos that the U.S. government should test rate capping in just two states, Vermont and Massachusetts. These are the home states of Sanders and Democratic Sen. Elizabeth Warren, both of whom have championed interest rate caps.
That would teach “a real lesson” to those who favor price controls, Dimon said.
“It would be an economic disaster,” Dimon said. “In the worst case scenario, this would result in a drastic reduction in the credit card industry” for 80% of Americans, he said.