Credit Card Interest Rates to Change Under New Bill

[BumRushDaShow]

Source: Newsweek

Published Mar 10, 2025 at 3:07 PM EDT | Updated Mar 10, 2025 at 9:48 PM EDT


In a bipartisan move aimed at financial reform, Representatives Alexandria Ocasio-Cortez and Anna Paulina Luna have introduced legislation that would cap credit card interest rates at a maximum of 10 percent. The proposed cap is a stark reduction from current rates, which average around 21 percent, according to the St. Louis Fed.

"During his campaign, President Trump pledged to cap credit card interest rates at 10 percent. We're making that pledge more than a talking point by introducing legislation to protect working people from remaining trapped under mountains of debt," Ocasio-Cortez said in a press release. Newsweek reached out to Representatives Alexandria Ocasio-Cortez and Anna Paulina Luna for comment via email on Monday.

Why It Matters

Echoing a campaign promise from Trump, the bill aims to realize a pledge that was touted as a solution to the debt many Americans face due to high credit card interest rates. By capping rates for around five years, the bill would provide a period of relief to consumers. As of December 2024, Americans hold $1.21 trillion in credit card debt, an increase of $45 billion from September 2024, per New York Fed data. What's more, 7.18 percent of U.S. credit card debt is in serious delinquency, meaning Americans are facing potential credit score damage, increased financial stress and the looming threat of collections.

What To Know

The legislation (H.R.1944) was introduced late last week by Ocasio-Cortez, a New York Democrat, and is co-sponsored by Luna, a Florida Republican. It would amend the Truth in Lending Act to immediately enforce an interest rate cap of 10 percent, directly challenging the substantial profits garnered by credit card companies at the expense of consumers.

Read more: https://www.newsweek.com/credit-card-interest-rates-change-under-new-bill-2042280

[GB_RN]

1. Unfortunately...

And despite/in spite of Cantaloupe Caligula the Corpulent’s campaign promise, this will go precisely nowhere. And he will, I’m sure, be…bribed persuaded to tank any Reichwing support for it too much money to be made…

[BumRushDaShow]

3. Well 2 people from complete opposite ends of the political spectrum

are calling out that campaign "talking point" and daring him to oppose it (like the "Price of eggs" ).

[GB_RN]

4. And That's Encouraging.

But the fact remains that Roberts and the others of The Corrupt 6 have made him…king…for all intents and purposes of criminal matters. Like I said, they offer him enough of a bribe, and he’d sell his mother’s bones.

[BumRushDaShow]

6. There are certain subjects that each seem to have strong opinions about

and we have seen odd combos of rulings so will have to see what might happen this year with some of the cases they are hearing.

[Wednesdays]

10. That's good, but

if TCF vetoes it, do they have enough votes to override?

[BumRushDaShow]

20. He operates "transactionally"

Whoever he talks to last provides what will be his latest policy shift. So it depends who gets to him before it comes time for something like that to happen.

[UpInArms]

2. AOC is a formidable human

👏🏼👏🏼👏🏼

[hueymahl]

5. This is a terrible idea

There likely is some regulations in the margins that makes sense to control abuses, but putting a hard arbitrary cap on rates is going to have the perfect of what they want. It is going to hurt those with lower credit and income by making credit unavailable in a lot of cases.

It could also cause an untended consequence of creating a crisis in the financial markets. Think about what happened in the housing crisis. Once investors realized that the risk did not fit the returns, the whole system cratered.

Just a really bad idea in general.

[PSPS]

7. It's a good idea.

Granted that I don't think it will go anywhere. Nevertheless, the interest rates being charged today used to called usury and were illegal. Then Reagan (and, frankly, Biden) came to town.

If, as you say, interest rates are so high because, without them, low-credit-rating people wouldn't be able to get credit, then the net result is the same. The same people who have low scores end up defaulting, causing a write-off, which the higher rate is claimed to be necessary to cover. At the end of the day, the bank remains solvent and the people living beyond their means have to stop spending money they don't intend to or can't pay back.

[Dumpy]

24. Pawn shops and payday lenders will thrive in this climate

People that need credit and not have a credit card will go to Leo the lender

[GregariousGroundhog]

25. You appear to be referring to the Depository Institutions Deregulation and Monetary Control Act?

It was signed into law on March 31, 1980 by President Carter (not Reagan). That act did a number of things, but among them was giving the Federal Reserve the ability to regulate non-member banks and making federally chartered banks immune to state ursary laws.

[Bengus81]

8. Credit card companies lived on Prime +5% for decades. Now....loan shark rates

I never used to have a card that was much over 10% (no special offer) 20-25 years ago,now look at the rates. If they went by the same standard today most people would be paying 12.5% which I think is fair for unsecured credit and a good history or repayment.

When the prime would drop so would CC rates in the "old" days.

[mwooldri]

12. True, but prime rate was... High.

In the early 2000s, a lot of the credit cards that I worked on as a customer service rep for Amex were Prime+9.99%. Prime+4.99% was reserved for those with very very good credit.

When Prime rate went down, a lot of rates did go up considerably. Add on reforms and people were given the choice of accepting a Prime+13.99% rate or... keep their Prime+4.99% rate and never use the card again (just set to pay it down).

While doing something to rein in high APR credit cards is IMO a good thing, my first thought about this is yeah, banks will cut back the amount of credit available. Now if it is incremental change (eg a Prime+9.99% top rate, with a cap of 20%), and incentives for banks to go lower and to really help those who are in difficulty ... That might get the banks in.

However if a cap of 10% is made, then only those with stellar credit will get a credit card... Until the banks revise their risk models and work out other ways. Higher "annual fees". Cards that require payment in full each month... but with an offer to transfer the balance to an installment loan that would not be subject to the 10% cap that the account holder would always be "pre-approved" for, up to a certain amount. Incidentally, while the card would be pay in full each month with no pre-set limit (think traditional American Express cards) the internal limit would be that of the pre-approved for a personal loan amount.

Credit card interest rates and fees in general are a good conversation to be had and needs to be had. But if you cap interest rates at X by law, banks will find other avenues to make money. More fees. Less "rewards". Higher card acceptance fees. Less available credit.

It's also a shame that the Dodgy Department gutted the Consumer Financial Protection Bureau (CFPB) who would have helped enforce such rules.

[Bengus81]

15. The Prime Rate during the Clinton years was 6%-9% By 2001 it was 6% and then down to 4.25%

I remember it well when it was that low by 2004 because we did our last refinancing on our house and had it paid off in four years. So credit cards I had then were mostly around 9.9% or a little above. The Prime today is 7.5%

Today's CC rates....16%-24-30% which is a total ripoff and is NOT fact based,just unbridled GREED.


https://www.fedprimerate.com/wall_street_journal_prime_rate_history.htm

[Old Crank]

13. That kind of regulation would make more sense.

Prime plus X%. A hard cap might create real problems should teh FED feel forced to jack up the rates.
I think the current 4.5% is going up and soon. MAybee not this next FED meeting but it is likely toc climb sooner rather than later.
Krugman seems to think we might get Stagflation.

[dchill]

9. "...substantial profits..."

Newsweek has totally mastered the art of understatement.

[Bengus81]

11. Josh Hawley with Bernie proposed similar legislation in Feb??

Did Hawley fall down,hit his head and wake up a Democrat?? This is the second thing like this I've read about him. As like his his other bill with Bernie I'm suspicious of that clown.

[Jacson6]

14. The banks will just close millions of consumer credit cards.

Credit cards are unsecured debt and the high interest rates pay for the defaulted accounts.

[Sneederbunk]

16. File this under Fat Chance.

[Admonish6]

17. 10% is way way too low on this

I can see 20%. But 10% was considered really low even when credit was flowing easy.

[FSogol]

22. Won't anyone think of the poor credit card companies?

Those companies make record profits preying on people with poor impulse control. Cutting their golden goose in half won't put them out of business.

[Admonish6]

23. It will cut

those ones without any impulse control off for sure. Do you think those don't exist and abuse credit?

[Lulu KC]

26. LOL

I think I just snorted.

[ET Awful]

18. This would reduce credit availability to a huge swath of the population

Credit card issuers will close accounts and greatly increase the criteria for approving new accounts.

This would have far reaching repercussions including reduced spending by consumers which would result in reduced sales for vendors and reduced income for manufacturers and distributors.

It sounds good on its face, but will have a lot more benefits than just reducing interest in the short term.

[Wiz Imp]

19. The Sanders-Hawley Bill capped the rate at 10% for 5 years

The reason bills are being introduced at 10% is because Trump made that promise. I'm sure the bill sponsors view it as a starting point. If 10% is too low then how about 12% or 13%? The fact that average rates were well below for extended periods in the past shows the current average rate of over 21% is way higher than it needs to be.

https://www.americanactionforum.org/insight/credit-card-interest-cap-the-plan-to-debank-the-most-financially-vulnerable/

In recent years, APRs on all credit card plans increased from an average of 13.7 percent between 1994 and 2021 to 19.6 percent between 2022 and 2024. The most recent data from the Federal Reserve showed that the current commercial bank interest rate on all credit card plans was 21.47 percent in Q4 2024.

The difference between the prime rate and the average CC rate was below 10% as recently as 2016 but is now over 15%. Consumers are clearly being ripped off.

[Ruby the Liberal]

21. While I applaud what they are trying to do

Banks price in for risk. The effect will be a lockdown of credit where people with lower disposable income or those with poorer credit histories will find themselves without the option of credit.

Revolving debt is a spiral that is difficult to get free from - but cutting people off (which will happen) will end badly without additional regulatory reforms. Like what the CFPB did (when it existed).