Senators Bernie Sanders and Josh Hawley Propose 10% Cap on Credit Card Interest Rates

In a bid to protect American consumers from crippling debt, Senators Bernie Sanders and Josh Hawley have introduced a new piece of legislation aimed at capping credit card interest rates at 10%. This initiative stems from a growing concern over the record-breaking $1.17 trillion in credit card debt carried by millions of Americans.

Reflecting on historical practices, interest charging by financial institutions draws some parallels to usury, a term that Dante Alighieri famously condemned in his work. Today, although the term may be less frequently used, concern over predatory lending practices remains highly relevant. As both major political parties campaigned largely on the promise of economic relief throughout the previous election cycle, the Senators’ legislation seeks to address a pressing issue affecting many families.

The Burden of Credit Card Debt

Many American families have turned to credit cards to cover basic necessities such as groceries, gas, and even rent. With inflation affecting budgets and wages stagnating, households are facing an unsustainable debt spiral. Credit card companies recognize this urgent predicament and continue to raise interest rates.

Statistics are staggering. In 2022 alone, credit card companies generated approximately $130 billion in profit from interests and fees while disseminating millions of credit card solicitations across the nation. This profit surge occurs even as control of monetary policy ostensibly favors consumers.

Disparities in Borrowing Costs

Despite the Federal Reserve offering borrowing rates below 4.5% to major financial institutions, consumers often face exorbitant credit card charges. Recent reports demonstrate that the average credit card interest rate hovers around 28.6%. The current structure is clearly inequitable for American consumers trying to make ends meet.

When large banks impose interest rates soaring over 25%, they abandon the image of service providers. Instead, they engage in unscrupulous practices that trap individuals in a cycle of mounting debt. The Senators argue this conduct must cease immediately.

Aiming for Relief

President Donald Trump also previously pitched a similar idea during his campaign, whereby he envisioned capping credit card interest rates at 10%. By introducing their legislation, Sanders and Hawley aim to fulfill that promise and provide significant financial breathing space for consumers.

This proposed legislation seeks to enact a cap on interest rates for the next five years, granting Americans much-needed relief from high credit card payments. With this reform, individuals would be able to focus on recovering financially rather than being weighed down by excessive fees.

Pushback from Financial Institutions

As anticipated, major credit card companies, including Visa, MasterCard, and American Express, are expected to lobby against the legislative measure. Over the last five years, these corporations have accrued profits exceeding $145 billion alongside generous compensation packages for their executives. These companies often argue that a cap on interest rates could restrict credit access for lower-income consumers.

Countering that view, Sanders and Hawley assert that the real danger lies in allowing financial institutions to continue charging predatory rates that place working-class Americans in precarious situations. Utilizing real figures, they illustrate the substantial costs associated with current interest rates. For instance, at 28%, a $5,000 balance could cost consumers around $11,000 in interest over time.

Public Support for Change

This legislation does not appear radical to the public. A recent poll indicates that around 77% of Americans favor capping credit card interest rates. The initiative resonates widely as many continue to feel the strain imposed by relentless debt and mounting costs in their everyday lives.

Lessons from the Past

Reflecting on the financial crisis in 2008, when some of the largest banks faced imminent collapse due to reckless behavior, taxpayers came to their rescue with significant financial bailouts. However, when it comes to offering practical support to struggling working families, lawmakers seem to falter.

Now is the time for Congress to step in and provide meaningful financial relief to those unable to cope with outrageous interest rates that threaten their stability. With Sanders and Hawley’s legislation, an opening for necessary and beneficial reform exists.

Moving Forward with Action

As the discourse around financial reform continues, Senators Sanders and Hawley are calling on their colleagues to support this critical legislation. They emphasize that Americans deserve protection from exploitative interest rates that harm their financial health. The urgent need for reform cannot be overstated.

Senator Josh Hawley, representing Missouri, is the author of the book titled Manhood: The Masculine Virtues America Needs.