WASHINGTON–While the credit union trade groups spent the weekend aggressively responding to President Trump’s proposed 10% cap on credit card APRs, stating it could have “devastating” effects on both the revenue at credit unions and the ability of many to obtain credit, one big question is whether the president even has the authority to implement such a cap.
Many legal analysts have said the answer is no, and that includes members of Congress. As the CU Daily reported here, Sen. Elizabeth Warren (D-MA) is among those who have said such a cap would require passage of legislation by Congress.
Bloomberg Law also reported that President Trump’s proposal would have to go through Congress, because the CFPB would likely be charged with enforcing the limit and doesn’t have the authority to put one in place on its own.
‘No Specific Authority’
An attorney with America’s Credit Unions has raised similar questions.
Ann Petros, VP of policy engagement and credit union operations with America’s Credit Unions, said she is currently unaware of any legal authority upon which the president could rely to put such a rate cap in place.
“Typically, when you see an executive order, it is implementing an existing law, not creating new laws or overriding statutes or acts of Congress, but simply directing agencies to take action to change, for example, an interpretation or a way that they implement an existing law,” Petros said. “There are decades of case law and legal analysis on not exactly this specific question of credit card interest rates, but presidential and executive branch authority. It just does not seem that there is much providing specific authority here to take action.
Should be Under the Purview of CFPB
“It’s hard to you know square with by the previous administration, which didn’t take any action on this topic, as there has been an interest in limiting in credit card interest rates for some time now,” Petros continued. “It seems like the CFPB would be the logical choice for implementing such a provision or mandate. I think the closest regulation or law on this topic would maybe be the CARD Act, but even that does not speak directly to this issue of limiting credit card interest rates, but rather just any abrupt changes or increases to credit card interest rates.”
What if Trump Announces Cap on Jan. 20?
Regardless of whether the president has the authority or not, what happens if on Jan. 20 Trump declares the interest rate cap is in place? Certainly, there would be litigation filed immediately. So, how should a credit union respond?
“We don’t want to speculate on the potential enforceability,” said Petros in response to a question from the CU Daily. “I think you’re right to assume that there could be some challenges to any action, whether it’s an executive order or otherwise, that does not go through Congress, so we will have to wait and see what those challenges look like and how they play out.”
So, Why Worry?
So, why worry about a proposed cap by the president that will most likely be delayed by court action?
Because one never knows how the courts might rule, according to Jason Stverak, chief advocacy officer with the Defense Credit Union Council.
“I always get scared when you take it from 535 people who make a decision to one federal judge, because you can’t predict how they’ll make decisions,” said Stverak in response to a question from the CU Daily during a press call. “Obviously, we’re going to be prepared for every avenue. We need to be to protect our credit unions and their ability to serve their members, particularly active-duty service members their families and veterans. It may be a moot point, but you may have a judge come in and say, ‘You know what? I think this is constitutional and you can do it.’
‘Seen This Before’
“We’ve seen process this past year on a myriad of issues,” Stverak continued. “I just think that this one is too incredibly harmful to credit unions to take that chance. That’s why within 15 minutes after (the president’s social media post) we were up and already reaching out to congressional offices.”
