President Donald Trump on Wednesday urged U.S. lawmakers to pass legislation capping credit card interest rates at 10%, after taking to social media this month to order banks to voluntarily lower interest rates.
“I’m asking Congress to cap credit card interest rates at 10% for one year, which will allow millions of Americans to save for a home,” Trump said at the World Economic Forum in Davos, Switzerland.
“They’re charging Americans 28%, 30%, 31%, 32% interest rates,” Trump said. “What happened to the loan shark?”
Bank stocks rose on the comments. The KBW Bank Index rose 2.2% in morning trading. Capital One, which relies on cards for most of its revenue, rose 1.9%.
Of the options the Trump administration has laid out to pressure U.S. banks over card interest rates, legislative avenues may be the least threatening. Last year, a bill introduced by Missouri Sen. Josh Hawley and Vermont Sen. Bernie Sanders that would cap annual interest rates on cards at 10% for five years has stalled in Congress.
Analysts, including KBW’s Sanjay Saklani, say the card bill is unlikely to pass with enough bipartisan support. Republican lawmakers, including House Speaker Mike Johnson, have expressed caution about card price regulations.
“If this is the way to go, it’s unlikely to happen,” Saklani said in an interview. “Many Republican leaders oppose this idea,” and other industries such as airlines and retail stores would also be hurt by the policy.
Breaking the “law”?
The episode may signal the limits of President Trump’s ability to persuade the financial industry to voluntarily give up billions of dollars in revenue to support his election-year affordability push.
After President Trump’s Jan. 9 Truth Social post about interest rate caps, banks said in their earnings calls that such limits would have unintended consequences, such as forcing lenders to simply cancel the accounts of many card customers, especially those with low credit scores.
The president told reporters that lenders who don’t comply with interest rates are “breaking the law,” but bank officials countered behind closed doors that they were already complying with the law.
Bankers and their lobbyists have privately told CNBC that they hope to fend off the president’s request given the difficulty of passing the bill.
Several major credit card lenders contacted by CNBC on Tuesday said there had been no change to interest rates, but all declined to be named. KBW’s Saklani said he is not aware of any major credit card companies that have lowered their rates.
On Wednesday, JPMorgan Chase CEO Jamie Dimon told a Davos audience that the U.S. government should test interest rate caps in just two states: Vermont and Massachusetts.
Doing so would provide “a real lesson” to those who support price controls, Dimon said.
“That would be an economic disaster,” Dimon said. He said that for 80% of Americans, “the worst-case scenario would be a significant reduction in credit card business.”
