KEN SWEET and SEUNG MIN KIM have the story for the Associated Press here. The industry argument is that issuers would lose money on higher-risk borrowers at that rate and so would be unwilling to provide credit cards to them. Here’s an excerpt from the article:
“A 10% credit card interest cap would save Americans $100 billion a year without causing massive account closures, as banks claim. That’s because the few large banks that dominate the credit card market are making absolutely massive profits on customers at all income levels,” said Brian Shearer, director of competition and regulatory policy at the Vanderbilt Policy Accelerator, who wrote the research on the industry’s impact of Trump’s proposal last year.
There are some historic examples that interest rate caps do cut off the less creditworthy to financial products because banks are not able to price risk correctly. Arkansas has a strictly enforced interest rate cap of 17% and evidence points to the poor and less creditworthy being cut out of consumer credit markets in the state. Shearer’s research showed that an interest rate cap of 10% would likely result in banks lending less to those with credit scores below 600.
The cynic in me wonders if the president’s renewal of this promise has something to do with distracting from the Epstein files.
