- Sen. Bernie Sanders and Rep. Alexandria Ocasio-Cortez unveiled ambitious new legislation on Thursday that would impose a federal cap of 15% on credit-card interest rates.
- The bill would also allow states to impose interest rates lower than 15%.
- It’s a bold plan at a time of record-high levels of credit-card debt and interest rates.
- “I am sure it will be criticised,” Sanders said of the legislation in an interview with The Washington Post. “I have a radical idea, maybe Congress should stand up for ordinary people.”
- Visit Business Insider’s homepage for more stories.
Sen. Bernie Sanders of Vermont and Rep. Alexandria Ocasio-Cortez of New York on Thursday unveiled new legislation intended to “take on Wall Street greed” by capping credit-card interest rates at 15%.
Under the “Loan Shark Prevention Act,” the annual percentage rate applicable to any extension of credit would not be allowed surpass 15% on “unpaid balances, inclusive of all finance charges” or “the maximum rate permitted by the laws of the State in which the consumer resides.”
In short, the bill would impose a 15% cap on credit-card interest rates at the federal level and allow states to establish lower interest rates. The bill would also give the Federal Reserve flexibility to allow lenders to charge higher rates if it’s determined the federal cap “would threaten the safety and soundness of financial institutions.”
It’s a bold plan at a time of record-high levels of credit-card debt and interest rates.
“I am sure it will be criticised,” Sanders said of the legislation in an interview with The Washington Post. “I have a radical idea, maybe Congress should stand up for ordinary people.”
“Wall Street today makes tens of billions from people at outrageous interest rates,” Sanders added.
The median credit-card interest rate was 21.36% as of last week, compared with 12.62% a decade ago, according to Creditcards.com. Meanwhile, Americans collectively hold more than $US1 trillion in credit-card debt, according to the Federal Reserve.
Sanders and Ocasio-Cortez pointed to stats like this when explaining why the bill is needed, also saying that in 2018 alone credit-card companies generated more than $US178 billion in interest and fees.
“If we are going to create a financial system that works for all Americans, we have got to stop financial institutions from ripping off Americans by charging sky-high interest rates and outrageous fees,” the lawmakers said in a summary of the bill. “Millions of Americans should not be paying credit card interest rates of 25 or 30 per cent.”
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