President Donald Trump’s call for a one-year 10 percent cap on credit card interest rates continues to meet with opposition from lenders, though it is unclear if the demand will move forward.
The populist proposal aimed to grant relief to Americans who are currently paying between 20-30 percent APR on credit cards. However, the hastily introduced mandate, which would require congressional action to go into force, has sparked backlash from across the financial sector due to its unprecedented nature, vague legal basis, and potentially negative impacts on credit availability.
In his post on Truth Social on January 9, Trump gave banks and card issuers just 11 days to comply. By January 20, however, no actual law was in force compelling them to reduce interest rates, resulting in most issuers keeping their APRs unchanged. Although practical and legal hurdles remain before the proposal can become law, it hasn’t stopped lenders from sounding the alarm, citing concerns around bank profitability, credit contraction and how lenders price risk.
While the announcement has not outlined any actual law or enforcement mechanism beyond public admonishment, the lack of clarity has highlighted growing regulatory uncertainty in the industry. For now, the 10 percent rate cap is more political theater than policy, but it does exemplify the uncertain new reality that financial services and fintech companies now find themselves in. If indeed such a rate cap were imposed, major lenders have claimed they would be forced to cut back on lending to higher-risk consumers which, in turn, could force lenders to adjust their underwriting models and seek alternative revenue streams.
Despite widespread pushback from the finance sector overall, some have jumped on the opportunity. For example, Bilt—a fintech startup focused on rent rewards—seized the announcement as a brand-building opportunity with the launch of a new credit card capping the rate at 10 percent for one year, just as Trump’s announcement demanded. However, while Bilt’s move aligns with the proposal, there’s no denying it’s a niche response.
As the financial services sector faces increased regulatory uncertainty characterized by populist appeal running into practical and legal hurdles, Trump’s announcement once again makes clear the need for financial services companies to stay agile amidst unpredictable policy shifts. It’s becoming increasingly clear that organizations should closely monitor political developments instead of waiting for formal regulatory announcements. For smaller fintechs, given their relatively agile and digital-native business models, such developments may even herald innovation and growth opportunities, as Bilt showed by capturing customer goodwill with its low-APR and fee-capped products.