Sen. Bernie Sanders and Rep. Alexandria Ocasio-Cortez have teamed against the credit card industry, proposing a 15% cap on interest rates to protect consumers from the “economic brutality” of big banks.
The high-profile Democratic lawmakers unveiled the rate cap proposal on Thursday as part of the Loan Shark Prevention Act they plan to introduce in Congress.
Credit card companies collected $180 billion in revenue from interest and fees last year, with the average interest rate for consumers now a record-breaking 17.71%, the lawmakers said. According to Sanders, who is running for the 2020 Democratic presidential nomination, 88% of Americans support a rate cap.
“We’re talking about economic brutality,” Sanders said, adding that banks are “going after desperate people … who cannot afford the basic necessities of life.”
Ocasio-Cortez said tightening the interest rate rules was a moral issue. Credit cards are “a debt trap for working people + it has to end,” she said in a tweet.
Under the Loan Shark Prevention Act, the Federal Reserve would have the ability to allow lenders to charge higher rates, but only for a period of 18 months and to preserve the “safety and soundness of financial institutions.”
As CNBC reports, the measure “comes amid a 2020 Democratic presidential primary in which contenders have tried to cast themselves as the strongest champion for workers and consumers.” Sen. Elizabeth Warren, another contender for the nomination, has portrayed the current frontrunner, former vice-president Joe Biden, as a champion of the credit card industry.
Matt Schulz, the chief industry analyst for CompareCards, said there was “a less than 0% chance” of the bill becoming law during President Donald Trump’s administration. “But if the winds of political change blow through Washington, D.C., next year, I’d expect that the fight will happen, simply because so many Americans want it to,” he told USA Today.
Opponents include The American Banking Association, which said the measure “will only harm consumers by restricting access to credit for those who need it the most and driving them toward less regulated, more costly alternatives.”