The White House. Photo: Diego M. Radzinschi/ALM
America’s Credit Unions has asked President Trump to reconsider his proposal to cap credit card interest rates at 10%.
On Friday night, Trump posted 100 words on Truth Social saying the one-year cap would begin Jan. 20, coinciding with the one-year anniversary of his inauguration.
“We will no longer let the American Public be ‘ripped off’ by Credit Card Companies that are charging Interest Rates of 20 to 30%, and even more,” Trump wrote. He reinforced his proclamation in comments to reporters on Air Force One on Sunday.
In response, AmCU President/CEO Scott Simpson sent a letter Sunday covering 900 words, six pages and 19 footnotes to say thank you, no thank you.
“While we appreciate your commitment to increasing financial affordability for Americans and fully share your goal of providing relief to consumers, data shows this initiative would achieve the exact opposite of those goals and prove disastrous for consumers and our economy writ large,” Simpson wrote.
“Extensive data and research show that an arbitrary 10% cap would severely restrict credit access for millions of borrowers, shrink consumer spending, and push vulnerable individuals into worse financial predicaments,” he wrote.
In a call with reporters Monday, AmCU officials said Trump’s order was outside his executive authority in a way unlike other actions that been contested in court. But Greg Mesack, AmCU’s SVP of advocacy, said the trade group was not yet sure what its next steps would be.
“All we have is a post on Truth Social and an interview on board Air Force One,” Mesack said.
Trump’s proposal is stricter than a bill introduced a year ago by Sens. Josh Hawley (R-Mo.) and Bernie Sanders (D-Vt.) that would have capped rates at 18%. That bill died in committee.
The NCUA already limits interest rates to 18% for federal credit unions, but AmCU’s predecessor trade groups, CUNA and NAFCU, objected to the bill.
Simpson wrote that average APRs are about 12.7% for credit cards issued by credit unions, compared with 15.5% for banks.
The Federal Reserve Bank of St. Louis reported Jan. 8 that banks were charging an average of 21% interest on credit cards in November.
Simpson wrote that lenders charge higher rates for people with lower credit scores to compensate for the higher risk of default. About two-thirds of credit card holders would see their credit reduced or eliminated under a 10% cap, he wrote.
“The borrowers most vulnerable to losing access are those with imperfect or subprime credit histories, ironically, the very people who most need the backup liquidity of a credit card in emergencies,” he wrote.
Contact Jim DuPlessis at Jim.DuPlessis@arc-network.com.
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