WASHINGTON--The Defense Credit Union Council has sent a letter to President Donald Trump warning that a proposed 10% cap on credit card interest rates could backfire on the very consumers it is intended to help, particularly younger servicemembers, junior enlisted personnel, and lower-income military families who lack prime credit profiles.
In the letter, DCUC said a rigid, federally imposed cap would likely force credit unions to tighten underwriting or scale back credit card and small-dollar lending, reducing access to affordable credit in military communities and potentially pushing vulnerable borrowers toward higher-cost, less regulated alternatives.
"A rigid cap would likely reduce access to credit by limiting credit unions’ ability to serve higher-risk borrowers. Many credit unions would be forced to tighten underwriting standards or scale back credit card and small dollar lending altogether. That outcome would disproportionately affect young servicemembers, junior enlisted personnel, and lower-income members who do not yet have prime credit profiles," wrote DCUC President and CEO Anthony Hernandez.
For military communities, the impact would be especially severe, he said.
'"Defense credit unions routinely provide small-dollar loans, emergency credit, and short-term financial relief to servicemembers facing unexpected expenses. Under an arbitrary 10%, many of these critical services could become unsustainable," Hernandez wrote. "As DCUC has emphasized, military families deserve policies that strengthen their financial security—not policies that unintentionally jeopardize it by limiting access to trusted, affordable credit."
Hernandez said there is also a real risk that restricting credit union lending would push vulnerable consumers toward predatory lenders.
"Limiting the ability of mission-driven institutions to price loans according to risk does not eliminate the need for credit; it simply shifts that need into less regulated, higher-cost alternatives outside the credit union system," he stated. "Finally, interest-rate cap proposals threaten the broader service model that defense credit unions provide. Beyond lending, our credit unions deliver financial counseling, fraud protection, deployment-related assistance, and tailored relief products for servicemembers and their families. A one-size-fits-all cap could undermine the sustainability of those services."