As the deadline set by President Trump for capping credit card interest rates approaches, the banking sector finds itself in a state of uncertainty and confusion.
NEW YORK – Just a week ago, President Donald Trump challenged the credit card industry to implement a 10% cap on interest rates, with a deadline of January 20 looming. As that date draws near, consumer advocates, lawmakers, and bankers are left scratching their heads, unsure of what the White House has in store or whether Trump is genuinely committed to this initiative.
Thus far, the administration has provided no clarity regarding the repercussions for credit card companies that fail to comply with the proposed rate cap. White House Press Secretary Karoline Leavitt mentioned that the president holds an "expectation" that these companies will adhere to his directive, but she refrained from specifying any potential consequences for non-compliance. "I can’t give you a detailed consequence, but this is certainly an expectation, and frankly, a demand the president has made," she stated on Friday.
Research conducted into Trump’s proposal during his 2024 presidential campaign indicated that if a 10% cap were enforced, American consumers could collectively save around $100 billion annually on interest payments. Interestingly, while such a move would significantly impact the credit card industry, researchers noted that it would remain profitable; however, benefits like credit card rewards might be reduced. This finding has been promoted by the administration through official channels on social media.
Bank lobbyists, who have been scrambling for answers this past week, remain largely uninformed about the White House's intentions. Although several bills aimed at capping interest rates have been introduced in Congress by both political parties over the years, leadership among Republicans in both the House and Senate has shown a lack of enthusiasm for enacting such legislation.
The Dodd-Frank Act, which was established in response to the 2008 financial crisis to reform the financial sector, explicitly prevents at least one federal banking regulator from imposing usury limits on loans, complicating the situation further.
Without a new law or executive order, it appears that Trump might resort to leveraging political pressure to achieve compliance from the credit card industry, similar to his tactics with other sectors. For instance, he previously urged pharmaceutical companies to lower drug prices, which led to some commitments from industry leaders. Likewise, he called on technology firms and chip manufacturers to shift their production back to the United States, prompting companies like Apple to enhance their domestic manufacturing capabilities.
The banking industry, particularly Wall Street, is not keen on engaging in a full-blown confrontation with the White House, especially considering the favorable deregulatory measures and tax cuts they have enjoyed under Trump’s administration. The recent legislation known as the One Big Beautiful Bill, enacted in July, introduced further substantial tax reductions, while a wave of deregulation encouraged companies to pursue mergers and acquisitions last year, resulting in a consistent influx of fees and revenue for major banks.
When addressing the issue of credit card interest rates, bank executives and lobbying groups have presented a dual message: while they resist the proposed cap, they simultaneously express a willingness to collaborate with the White House.
In a briefing with journalists, Jeffrey Barnum, the Chief Financial Officer of JPMorgan, indicated the industry's intention to leverage all available resources to contest the administration’s proposed rate cap. As one of the largest credit card issuers in the country, JPMorgan oversees a staggering $239.4 billion in customer balances and boasts significant partnerships with well-known brands like United Airlines and Amazon. Additionally, they recently acquired the Apple Card portfolio from Goldman Sachs, which underscores their influential position in the market.
On the other hand, Mark Mason, Citigroup’s CFO, articulated his company's opposition to a cap, asserting that it would limit consumer credit and negatively affect the economy. Nonetheless, he acknowledged the pressing issue of affordability and expressed eagerness to work alongside the administration to find viable solutions.
Trump has escalated his focus on the credit card industry by endorsing a legislative proposal in Congress that could reduce the financial gains banks receive from merchants whenever customers use their cards.
Not all companies are waiting idly for Trump’s next move. In a proactive step, the fintech firm Bilt introduced a new line of credit cards this week and announced that it would impose a 10% interest rate cap on new purchases for a year. Though this is essentially a promotional rate, similar to offers made by other credit card companies in the past, Bilt’s approach could serve as a model for how the industry might align with the White House's demands without fundamentally compromising their business models. Ankur Jain, CEO of Bilt, expressed this sentiment in a recent interview, stating, "If a credit card rate cap is going to happen, we’d prefer to be at the forefront of that change."
