WASHINGTON — Today is the deadline set by President Trump for credit unions, banks and other card issuers to comply with his proposed 10% cap on credit card APRs, but with no accompanying regulations, guidance or enforcement mechanism, issuers have been left in the dark, with most analysts saying the president lacks the authority to implement such a cap anyway.
As The CU Daily reported here, when Trump stated in a social media post that he was calling for a one-year cap on credit card APRs of 10%, America’s Credit Unions and the Defense Credit Union Council joined with other financial services trade groups in quickly pushing back on the proposal.
Trump has framed the idea as consumer relief amid elevated borrowing costs. But as the date nears, card issuers say they have received no formal direction from regulators, and no rulemaking has been initiated to carry out the proposal.
‘An Expectation’
White House Press Secretary Karoline Leavitt told reporters the president has “an expectation” that credit card companies will accede to his demand.
“I don’t have a specific consequence to outline for you, but certainly this is an expectation — and frankly a demand — that the president has made,” she said Friday.
Lack of Authority
As The CU Daily also reported, America’s Credit Unions’ Ann Petros said the president lacks authority to implement such a cap, as it would need to be enacted by Congress. Other analysts and members of Congress agreed.
“There is no clear legal pathway for a president, acting alone, to mandate a 10% cap on credit card interest rates,” said one financial regulation analyst. “Absent legislation, any such cap would almost certainly be challenged and struck down.”
As other analysts and credit union trade groups have also noted, even if Congress were to enact a cap, enforcement would likely fall to the Consumer Financial Protection Bureau, which would need to write and implement rules — a process that typically takes months or longer — and the Trump administration has largely gutted the bureau.
Disruption of Credit
Credit union trade groups and others have warned that a hard cap at 10% could significantly disrupt credit availability, particularly for borrowers with weaker credit profiles, by making many accounts unprofitable for issuers.
Meanwhile, when Trump proposed the cap, DCUC Chief Advocacy Officer Jason Stverak warned the legislation could become a “Frankenstein” issue — a warning that proved prescient when Sen. Roger Marshall, R-Kan., reintroduced the Credit Card Competition Act, which would cap interchange rates at the largest institutions.
Credit unions and other financial institutions have strongly opposed the CCCA when it was introduced previously. Retailers have just as strongly supported it, and Trump has publicly declared his support for that legislation as well.
