Lawmakers Propose Cap on Credit Card Interest Rates (businessinsider.com)
- Reference: 0176903287
- News link: https://news.slashdot.org/story/25/04/02/1443242/lawmakers-propose-cap-on-credit-card-interest-rates
- Source link: https://www.businessinsider.com/credit-card-interest-rate-cap-debt-delinquencies-alexandria-ocasio-cortez-2025-4
Credit card debt has reached $1.2 trillion in Q4 2024, up from $720 billion in the same quarter of 2004, according to Federal Reserve Bank of New York data. Average annual percentage rates nearly doubled to 21% in 2024 from 12% in 2003. The Federal Reserve Bank of Philadelphia reported a record number of cardholders making only minimum payments in Q3 2024, "showing signs of consumer stress."
Further reading : [2]Study Reveals Why Credit Card Interest Rates Remain Stubbornly High .
[1] https://www.businessinsider.com/credit-card-interest-rate-cap-debt-delinquencies-alexandria-ocasio-cortez-2025-4
[2] https://news.slashdot.org/story/25/04/01/1542236/study-reveals-why-credit-card-interest-rates-remain-stubbornly-high
Pissing in the wind (Score:2, Informative)
I mean I guess it's good press to propose things that aren't going to go anywhere and I'd be okay with it if they were doing effective things in the meanwhile but they absolutely are not.
There is rock solid evidence that 3 and 1/2 million voters were prevented from voting last year by suppression tactics. And I've only takes into account the ones who couldn't vote because their signatures or registrations got challenged as part of a coordinated effort to prevent democrats from voting. There's also the 7
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> I mean I guess it's good press to propose things that aren't going to go anywhere and I'd be okay with it if they were doing effective things in the meanwhile but they absolutely are not.
The [1]date of enactment [congress.gov] is set to January 1st, 2031, so even if it passed this bill is meaningless for more than half a decade.
> There's also the 7-hour wait times to vote in left leading districts of Pennsylvania.
It's interesting that, in the US, the actual mechanism of voting is controlled not by the federal or state governments, but by county election commissions. So "left leaning" districts with long lines are typically self inflicted--they are the cause of and have the power to resolve these issues, the problems are not (usually) imposed by evil republicans lurking in the shadows. This i
[1] https://www.congress.gov/bill/119th-congress/house-bill/1944/text?s=1&r=1
They're not "self inflicted" (Score:2)
You need to dig deeper to understand. The control of the voting machines is controlled hire up. They distribute too few or broken machines to those districts.
They also close polling locations. So you'll find entire cities with 1 polling location.
That's how they get the long lines.
The Dems often control the AG, Sec of State & governorship, but refuse to use that power for some daft reason. A handful of lawsuits and a bit of strong arming could stop all this, but they just won't do it.
Oh no, the poor credit companies. (Score:2, Interesting)
How will the poor credit companies continue to post record profits if they can't take advantage of those who have to use credit to take care of basics like healthcare and home repairs since our government insists on not doing anything to help the common man. This is so unfair to the banking industry. How dare these government officials try to do anything that might help the common man.
I'm sure this comment section will be filled with well reasoned responses about people using credit needing to change their
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A 10% cap on interest means only the wealthy and folks with credit scores north of 750 will get a credit card. Not necessarily bad, but I can see folks bitching about how the poor are being frozen out of credit markets.
Re:Oh no, the poor credit companies. (Score:5, Insightful)
Poor being locked out of the credit market ... may make them less poor
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This is pretty insightful, but probably a politically unacceptable position to take (for AOC et. al., not for you). I can see people crying out against the nanny state already, even if it would be a good thing to not be handing out credit cards like they're debit carts.
Everyone saying you'll need a FICO of 700 - 750 just to get one... yeah I kinda wish it had been that way when I was a kid. I spent my 20s with thousands in credit card debt, I couldn't even tell you what I spent it on, because I was a young
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> Poor being locked out of the credit market ... may make them less poor
Many lower income individuals already do not have credit cards (many don't even have bank accounts, but that's a different discussion). For those who do have credit cards, they are often used for essentials, such as food. So take away the cards, and it means you don't eat at the end of the month. You might argue that not paying interest on a credit card would allow you to spend more money on food, but when you're hungry, you're hungry right now, and if it's eat or charge it, what would you choose?
Making c
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This was exactly what I was going to say. The interest rate on a card is proportional to the perceived risk of the debtor. If they aren't allowed to set interest rates high enough to offset that risk, they simply will not take on the risk.
Great solution!
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Its AOC yapping in a Trump world. No one listening or cares though.
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Check that Further Reading link. Turns out those with good credit get to subsidize those that default.
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Those who pay off their bill pay zero interest, they dont subsidize anyone.
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Credit card companies (along with Visa, MC, and AMEX) charge those who accept cards a 3-5% fee for the transaction (and sometimes additional monthly fees on top of this for equipment "rental", account fees, etc.). So everyone who shops at those locations pays for those costs in the form of higher prices.
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> This was exactly what I was going to say. The interest rate on a card is proportional to the perceived risk of the debtor.
No, it's not. The interest rate on a card is proportional to the perceived how much the credit card company thinks it can get away with.
Just discussed right here: [1]https://news.slashdot.org/stor... [slashdot.org]
[1] https://news.slashdot.org/story/25/04/01/1542236/study-reveals-why-credit-card-interest-rates-remain-stubbornly-high
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10% definitely seems pretty low to me.
Even with good credit and income, I expect unsecured debt to be around 12%. We had a year with 9% inflation recently, good luck getting adjustable rate unsecured credit at 1% over inflation.
If I were to make a protect people policy around this, I would instead make a policy that minimum payments must pay down the card in x number of years (1 or 2). This would keep people's balances lower because though would get approved for as large a cap.
If one needs more than 2 years
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I've seen some research showing these downsides. It makes sense in a lot of ways. Someone who gets into $10k of credit card debt at 30% might end up with a loan at even higher effective rates (with fees and stuff) from a cash advance/pawn shop. I'm not sure if I entirely believe it because it takes a lot more effort and intention to get a cash advance than to use a credit card.
Even still, the fact that there are some examples of this negative outcome means that we should probably gradually reduce credit
Re: Oh no, the poor credit companies. (Score:2)
Either what you said or they will just dramatically raise existing fees and/or impose new ones. Either way they will get their money or they will go out of business. Government needs to stop meddling in the free market for credit and most other arenas too actually.
The Cycle (Score:2)
1. Government raises interest rates to fight inflation 2. Interest rates rise 3. People complain about high interest rates 4. Government caps interest rates 5. Financial institutions start denying lines of credit to high risk borrowers 6. People complain that they can't get credit 7. Government forces banks to take on high risk borrowers 8. High risk borrowers default 9. Financial institutions need bailouts 10. Government creates money to bail out financial institutions 11. Inflation increases 12. Goto step
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The government's primary job is to take care of 3 things: defense, criminal law, and civil law. That's the bare minimum to run a country, and I would argue that the US has these three things covered 100% (and defense at about 300%). Everything above that is optional, and isn't really the choice of the government, but the choice of the people in what they, collectively, want to fund from taxpayer dollars. So when you say "our government insists on not doing anything to help the common man," that's incorre
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> The government's primary job is to take care of 3 things: defense, criminal law, and civil law. That's the bare minimum to run a country, and I would argue that the US has these three things covered 100% (and defense at about 300%). Everything above that is optional, and isn't really the choice of the government, but the choice of the people in what they, collectively, want to fund from taxpayer dollars. So when you say "our government insists on not doing anything to help the common man," that's incorrect. The correct statement is, "the majority of the American people have collectively decided not to do as much as *you* would like to forcibly take money from some people and redistribute it to other people." After all, the common man is free to do home repairs if he likes. The idea of collecting a bunch of money from everyone else to then pay someone to come and fix your house... sure, that sounds good for you, but maybe not to the rest of the people. But keep living in your fantasy land where you never have to think about where stuff actually comes from.
This argument of yours falls apart pretty egregiously when it comes to big business being handed money to do more than just operate. Hell, sometimes they even get our money handed to them just to set up shop. I'm more of the mind that *IF* our government is going to insist on shoveling money at the business sector every few months, perhaps it's time they shovel just a tiny portion of that same money back at the people who pay into their coffers. Or they could stop shoveling massive piles of cash at the busi
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> The government's primary job is to take care of 3 things: defense, criminal law, and civil law.
Which part of the constitution says that?
The version I have says the government's job is "to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity."
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On average, would low income/high-risk borrowers be worse off if they can't easily get uncollateralized loans?
For every single corner case where a credit card saved someone hardship, there's a hundred who fall into it. Buying on credit is an addiction.
Re: Dumbest idea today (Score:1)
You are correct. Yet another case where the government screws up the free market and where new laws will have lots of adverse unintended consequences that myopic lawmakers are blind to.
Capping is never a good idea (Score:2)
Now I'm all for limiting and lowering as I feel these credit cards have become predatory, but capping never works. That's basic economic shit, but we've always known that most of those in politics don't understand economics.
Instead keep in x amount of % points over the fed funds rate and set it similarly as mortgage rates. It will go up and down with interest rates.
I know we feel as if we will never see over 10% rates ever again, but heaven forbid we be forward thinking with our rules. /s
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> Now I'm all for limiting and lowering as I feel these credit cards have become predatory, but capping never works.
Up until 1978, the U.S. had usury laws which did exactly that. As far as I can tell, the US economy worked..
historical information here: [1]https://www.nasdaq.com/article... [nasdaq.com]
[1] https://www.nasdaq.com/articles/how-supreme-court-ruling-killed-usury-laws-credit-card-rates-2010-11-12
Also free beer? (Score:2)
What's happened to the left?
Trump is a disaster. Simply seize the center and drop the woke nonsense, and the GOP is dead for years.
Paying bills is for suckers (Score:2)
If the president doesn't have to pay his bills then why should I?
Sorry, but no (Score:2)
I like my rewards. I am a responsible individual. I do not want them taken away because others make bad decisions.
Are they predatory? Sure. But you will not solve anything by doing this - you will only hurt those who can control their spending habits.
It will never happen... (Score:2)
... at least not under this administration. Regardless of its merits - and I have my doubts about those - this legislation will never be passed by the politicians who moved to kill the Consumer Financial Protection Bureau.
The interest rate shouldn't be hardcoded (Score:2)
The idea of limiting credit card interest rates is not a bad one, but I question the wisdom of hard-coding a number, any number.
Indexing tends to make for laws that remain more relevant. Considering that she is proposing 10% at a time that the prime rate (PR) is 7.5%, that puts her target between 1.25*PR and 1.5*PR.
There may be a cause for discussing the exact multiplier, but things like this should be linked to some index.
Interesting. (Score:4, Interesting)
If you look here: [1]https://www.in2013dollars.com/... [in2013dollars.com] $720 is today worth $1210.82. So adjusted for inflation, the values are exactly the same.
[1] https://www.in2013dollars.com/us/inflation/2004?amount=720
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And less per person, since population is up.
Probably partially because the rates are high enough that people are using other forms of credit.
Re: Interesting. (Score:2)
The CPI is a lie. Does that inflation calculator website that you used factor the CPI lie or some other measure such as the PPi or the more accurate shadowstats values?
CPI is a lie? (Score:3, Insightful)
Want to source that? Creating a price index is HARD, because everyone is spend their money in different ways, so there are always going to be relative gainers and relative losers compared to CPI. For example if you own your own home or have a long term mortgage at a fixed rate, then your housing costs, apart from property taxes, are totally fixed. If you're renting or facing a big jump in your mortgage rate, then your housing costs are a lot higher. Same with energy, food, transport, clothing and, for slash
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It's supposed to calculate more of 'real inflation' -- not using chained CPI as well as other criteria. I don't remember all the details but it has always seemed reasonable accurate.