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In a letter to the Senate late last month, the American Bankers Association, the OBA and 51 other state bankers associations expressed strong opposition to any effort to attach the 10 Percent Credit Card Interest Rate Cap Act as a poison-pill amendment to the unrelated GENIUS Act or any other legislative vehicle.
The associations outlined why the legislation, which would impose an all-in annual percentage rate cap at 10 percent on credit cards, “would have a devastating effect on access to credit for individuals and small business owners who rely on seamless access to liquid credit lines.”
“Study after study have shown that even modest government price controls raise costs rather than lowering them,” the groups wrote. “Massive government intervention dictating the terms of a highly popular unsecured credit product would restrict or outright eliminate the availability of this type of short-term revolving line of credit for millions of Americans.”
An ABA analysis conducted in 2020 found that if a 15% interest rate cap were enacted, nearly 95% of subprime borrowers would be at risk of losing access to credit cards – equivalent to 65 million accounts. The negative impact on credit access would be even more pronounced at 10%.
The groups explained that for many Americans a credit card is a critical source of funds in times of need, such as when they face an unexpected healthcare bill or an expensive car or home appliance repair. The tens of millions of consumers who would no longer be able to access the credit card market would be forced to turn to less regulated and more costly alternatives to manage these financial disruptions, including payday lenders, unregulated fintech lenders and pawn shops.