Credit Card Interest Rate Cap Proposal Sparks Strong Opposition from Banking Industry

An amendment to the GENIUS Act that proposes to cap credit card annual percentage rates at 10% has met with opposition from large financial trade groups, including the American Bankers Association and America’s Credit Unions.

In a letter addressed to U.S. Senate leaders John Thune (R-SD) and Chuck Schumer (D-NY), the groups said the amendment would “severely restrict the availability of this type of credit for everyday consumers.”

Credit card issuers will want to keep a close eye on how this issue plays out. The average interest rate on credit cards in the U.S. is 24.28%, according to a recent report.

Capping the interest rate at 10% would rob issuers of an important source of revenue they use to fund rewards programs, ramp up fraud prevention strategies, and improve customer experiences.

As the GENIUS Act, which aims to bring oversight to stablecoin payments, progresses through political channels, lawmakers are attempting to attach amendments they support to it. 

In what will serve as welcome news for credit card issuers, Vice President J.D. Vance has come out in support of passing a “clean” version of the GENIUS Act that doesn’t include any amendments. 

The Senate has not yet determined which amendments, if any, will be allowed to the GENIUS Act. But Vance’s support of passing a version of the act sans amendments may influence others in the nation’s capital to follow his lead.

Senators Josh Hawley (R-MO) and Bernie Sanders (I-VT) back the amendment to the GENIUS Act that would restrict credit card interest rates. 

Sanders outlined his support of a credit card rate cap in a statement released earlier this year in which he said that large financial institutions that charge more than 25% interest on cards are “engaged in extortion and loan sharking.”

“We cannot continue to allow big banks to make huge profits ripping off the American people,” Sanders said. “This legislation will provide working families struggling to pay their bills with desperately needed financial relief.”

But bank groups argue that an interest rate cap will harm the very groups Sanders is trying to protect. In their letter to Thune and Schumer, the groups say the amendment would ultimately drive people to more expensive and less regulated credit sources, such as pawn shops and the black market. 

Credit cards can help people grow their credit history and act as a stepping stone to other lending products.

The groups also commented on the important role that credit card access can play in helping consumers improve their financial standing.

“Credit cards are the number one way that people who are ‘credit invisible’ can become credit visible and grow their credit history, helping them gain access to other products like mortgages and auto loans,” the groups wrote.

We’ll continue to monitor this story as it unfolds. The Senate has not yet scheduled a final vote on the GENIUS Act.