White House Mulls Executive Action on 10% Credit Card Cap

Now, the White House is considering executive action to make that 10% cap happen, Bloomberg News reported Friday (Jan. 16).

This plan, still being drafted, is part of a broader effort to bring down costs for Americans, the report said, citing sources familiar with the matter. The action may also call on regulators to ease some liquidity standards to make the plan more enticing to banks, the sources added.

As Bloomberg noted, the financial industry has spent the past week trying to figure out details of the plan, with Wall Street contending it would harm lower-income consumers and affect their own businesses.

Trump has fixed Jan. 20 as the deadline for card companies to enact this measure. Last week, White House Press Secretary Karoline Leavitt said the president expects companies to reduce their rates by that date, framing it as a “demand” from Trump.

During bank earnings calls last week, lenders such as JPMorgan Chase, Bank of America and Citigroup all expressed their opposition to the cap. 

“If you wind up with weakly supported directives to radically change our business that aren’t justified, you have to assume that everything’s on the table,” JPMorgan Chase Chief Financial Officer Jeremy Barnum said on a call with reporters to discuss the banking giant’s earnings. “We owe that to shareholders.”

On his bank’s earnings call, BofA CEO Brian Moynihan said that “the explanation we’ve always made sure people understood is that the if you bring the caps down, you’re going to constrict credit, meaning less people will get credit cards, and the balance available to them on those credit cards will also be restricted.”

Banking industry groups have been pushing back as well. Soon after Trump’s initial pronouncement, these groups issued a statement saying the cap “would reduce credit availability and be devastating” for consumers and small businesses.

“We’re talking about unsecured lending, so it’s not like an auto loan or a mortgage loan where there’s something you can take back,” Rob Nichols, president and CEO of the American Bankers Association, told Bloomberg.

Bloomberg’s report came soon after White House National Economic Council Director Kevin Hassett said in an interview with Fox Business that the cards that would result from the rate cap “could potentially voluntarily provide for people who are in that sort of sweet spot of not having financial leverage very much because they don’t have access to credit, but they have enough income and stability in their lives so that they’re worthy of credit.”