WASHINGTON—The proposal from Sens. Bernie Sanders (I-VT) and Josh Hawley (R-MO) to cap credit card interest rates at 10% would severely limit access to credit for individuals and small business owners who rely on personal credit cards for liquidity, the American Bankers Association and 52 state bankers associations wrote to the senators, the ABA Banking Journal reported.
The “10% Credit Card Interest Rate Cap Act” [S. 381] would force tens of millions of consumers who would no longer be able to access the credit card market to turn to less regulated alternatives including payday lenders, unregulated fintech lenders and pawn shops, according to the associations, the ABA Banking Journal said.
In their letter, the groups said multiple studies have shown that government price controls raise costs rather than lowering them. They pointed to several examples in states and other countries where rate caps caused economic harm, the ABA Banking Journal noted.
“Government intervention prescribing the terms of a highly popular unsecured credit product would likely restrict or eliminate altogether the availability of this type of short-term revolving line of credit for millions of Americans who depend on this resource,” the groups wrote.