AOC Advances Trump's Campaign Pledge to Cap Credit Card Rates at 10% Under New Law

US Representatives Alexandria Ocasio-Cortez, also known as AOC, and Anna Paulina Luna introduced a bill late last week to cap credit card interest rates at 10%. The H.R. 1944 bill aligns with US President Donald Trump's campaign pledge to cap credit card rates at 10%.

'We're making that pledge more than a talking point by introducing legislation to protect working people from remaining trapped under mountains of debt,' Ocasio-Cortez said in a press release. The New York Democrat added that high-interest credit cards 'regularly trap working people in endless cycles of debt. At a time when families are struggling to make ends meet, we cannot allow big banks to shake down our communities for profit.'

Meanwhile, Luna, a Florida Republican, stated that she is 'proud to be the bipartisan co-lead to this legislation. For too long, credit card companies have abused working class Americans with absurd interest rates, trapping them in an almost insurmountable amount of debt. We need a fair solution.'

The Bill Would Keep Rates Low For Five Years

The bill, a bipartisan effort to reduce the financial burden away from tens of millions of Americans, would cap credit card interest rates until 1st January 2031.

According to LendingTree, the average American with an unpaid credit card balance owed £5,589 ($7,236) in Q3 2024. Furthermore, New York Fed data revealed that Americans held £934.72 billion ($1.21 trillion) in December 2024, a £34.76 billion ($45 billion) jump from September 2024. Worryingly, 7.18% of US credit card debt is in delinquency, which is damaging credit scores, potentially threatening collections, and straining household finances.

Credit card interest rates spiked after years of elevated inflation, which picked up again after cooling at the end of 2024. According to Forbes Advisor's weekly credit card rates report, the current average is 28.72%. If passed, the bill proposed by AOC will attempt to massively slash the credit card rates by amending the Truth in Lending Act for immediate enforcement.

Senators Bernie Sanders and Josh Hawley, who introduced similar legislation (S.381) in early February, also support the bill.

New Bill Would Impact Earnings of Credit Card Companies

Earnings from exorbitant interest rates account for a big chunk of credit card companies' revenue. CFPB findings, cited in AOC's bill, revealed that credit card companies have faced criticism in recent years for high interest rates, which have almost doubled over the past decade.

However, financial experts shared diverging views on the bill. Some think the proposed legislation could markedly limit credit availability to high-risk borrowers, swaying them towards less regulated avenues to secure a loan, even those who engage in predatory lending practices.

'If you are forced to cap [APRs for] those with the highest interest rates, it would no longer make sense for the issuer to even offer them a product because it might not even be net positive from a revenue perspective,' said John Cabell, managing director of payments intelligence at J.D. Power, told Fortune last month.

The bill was referred to the House Committee on Financial Services last week. However, its outcome will primarily depend on the sponsors' ability to rally adequate support from lawmakers and the public.

Originally published on IBTimes UK