Credit Card Rate Cap Bill Would Hurt Consumers, Negatively Impact Access to Credit

Your League today reached out to U.S. Sens. Mark Warner and Tim Kaine, asking that they oppose legislation from Sen. Josh Hawley, R-Mo., that would cap credit card interest rates at 18 percent.

"This legislation amounts to an attempt at government price controls," notes League Chief Advocacy Officer JT Blau. "This legislation would ultimately harm consumers, pushing many into the arms of predatory lenders, because mainstream lenders will be unable to appropriately price their credit cards for risk."

While federal credit unions already abide by an interest rate cap, this legislation seeks to also include a host of fees in that interest rate calculation - none of which are now factored into that calculation. From a risk management and regulatory standpoint, that change in the interest rate calculation would cause many credit unions to cut back on credit access for riskier borrowers, cut rewards programs, or even exit the credit card business. For state-chartered credit unions with a higher interest-rate ceiling, this cap would hamper their ability to extend credit to credit-challenged members.   

S. 2760, the Capping Credit Card Interest Rates Act, drew immediate opposition from the financial services industry, with CUNA, NAFCU, and other financial trade associations representing virtually all banks and credit unions penning a letter to senators voicing their concerns.