Sen. Bernie Sanders (I-Vt.) announced plans to introduce legislation supporting President-elect Donald Trump‘s proposal to cap credit card interest rates at 10%, as credit card defaults reach their highest levels since the 2008 financial crisis.
What Happened: Major credit card companies saw their stocks decline on Monday, with Visa Inc. V falling 1.05%, Mastercard Inc. MA dropping 1.25%, and American Express Co. AXP declining 1.24%.
“Donald Trump proposed a 10% cap on credit card interest rates. Great idea. Let’s see if he supports the legislation that I will introduce to do just that.” Sanders said wrote on X on Monday.
The proposed cap would mark a significant reduction from the current average rate of 21.5%, according to Federal Reserve data. Trump first introduced the idea during a recent campaign rally at Nassau Coliseum, where he told a crowd of 16,000 that rates of 25% to 30% were unacceptable.
The initiative comes as U.S. credit card lenders wrote off $46 billion in seriously delinquent loan balances during the first nine months of 2024, a 50% increase from the previous year, according to BankRegData.
“High-income households are fine, but the bottom third of U.S. consumers are tapped out,” said Mark Zandi, head of Moody’s Analytics. “Their savings rate right now is zero.”
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Why It Matters: Industry groups have expressed strong opposition to the proposal. The Consumer Bankers Association warned that government-imposed price controls would particularly harm lower-income Americans, potentially forcing them to turn to riskier alternatives like payday lenders.
Capital One Financial Corp. COF, the nation’s third-largest credit card lender, reported its annualized credit card write-off rate increased to 6.1% in November, up from 5.2% a year ago.
Despite lenders writing off nearly $60 billion in consumer credit card debt over the past year, another $37 billion remains overdue by at least one month.
Odysseas Papadimitriou, head of the consumer credit research firm WalletHub, highlighted that consumer spending power has been weakened. Despite nearly $60 billion in consumer credit card debt being written off in the past year, an additional $37 billion remains overdue by at least one month.
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