Bill capping credit card interest rates will curb consumer credit options: CEI analysis

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Sen. Bernie Sanders (I-Vt.) and Josh Hawley (R-Mo.) today introduced legislation to cap credit card interest rates at ten percent, a plan that would have some undesirable consequences for consumers if enacted.

Statement by John Berlau, CEI Director of Finance:

“While Sens. Sanders and Hawley may describe their new bill to cap credit card interest rates at 10 percent as populist, their price control legislation is actually the height of elitism. The senators – and members of the political class who support their approach –imply strongly that they know better than the average American consumer what the price should be for credit.

“The bill would do untold harm to the very families the lawmakers say they wish to help. Should it become law, the Sanders-Hawley legislation would not make the need for credit disappear. Since credit card availability would shrink dramatically as a result of this bill, consumers seeking credit would likely be relegated to arguably less appealing option such as payday loans, pawn shops, and rent-to-own plans for items such as electronics and appliances. While there is nothing inherently wrong with these options, consumers should have the choice of credit cards if they agree to the interest charges.

“Members of both parties with compassion and common sense must reject this harmful and elitist attempt to substitute politicians’ judgment of how much debt is appropriate in place of that of consumers weighing options for their families.”

Related analysis:

Iain Murray, “Senate Credit Card Bills Will Cost Working Class Consumers,” https://dcjournal.com/senate-credit-card-bills-will-cost-working-class-consumers/

Matthew Adams and John Berlau, “The Annual Percentage Rate Is the Wrong Metric for Assessing the Cost of a Short-Term Loan