Hawley planning measure to cap credit cards’ annual percentage rate at 18 percent
Sen. Josh Hawley (R-Mo.) introduced a bill Tuesday that would cap the interest rate for credit cards at a “common sense level” of 18 percent in an effort to protect vulnerable borrowers.
“Americans are being crushed under the weight of record credit card debt — and the biggest banks are just getting richer,” Hawley said in a statement. “The government was quick to bail out the banks just this spring, but has ignored working people struggling to get ahead.”
“Capping the maximum credit card interest rate is fair, common-sense, and gives the working class a chance,” he added.
American credit card debt passed $1 trillion this summer, contributing to quickly rising consumer debt, which grew by nearly $18 billion from May to June, according the most recent federal data available.
The average U.S. household carries about $10,000 in credit card debt, according to another analysis.
Credit card debt fell significantly in 2020 after the government sent out stimulus checks, but the figure has continued to rise since then, now surpassing its previous pre-pandemic high.
Interest rates on credit card debt have also increased in recent months. The average rate was about 21 percent as of June. It was about 17 percent last spring.
“We’ve been tracking credit card rates since 1985, and these rates are the highest we’ve ever seen,” Ted Rossman, a senior analyst at Bankrate, told The Hill earlier this year. “The minimum-payment math is pretty staggering.”
Almost half of credit card holders carry a debt balance month to month, up from just more than a third last year, a Bankrate analysis found.
Hawley’s legislation would also prevent credit card companies from implementing fees to get around the 18-percent cap and issue penalties to enforce the limits.
The proposal is to the left of previous reform efforts from the White House and is similar to efforts from progressive Democrats. In 2019, Sen. Bernie Sanders (I-Vt.) and Rep. Alexandria Ocasio-Cortez (D-N.Y.) introduced bills to cap the interest rate at 15 percent, though they never left committee.
Previous reform proposals from the Biden administration would cap late fees at $8 instead of as much as $30 for first offenses and $40 or more on subsequent late payments.
A spokesperson for the American Bankers Association, the industry lobbying group, criticized the proposed reform.
“Price controls don’t work and the mischaracterization of deposit insurance coverage — which banks themselves pay for — doesn’t justify this type of harmful government intervention,” the spokesperson told the New York Post.
“This proposal would harm consumers by restricting access to credit for those who need it the most and driving them toward less regulated, more costly alternatives,” they added.