Dear Senators,
We were recently informed of efforts by Senator Josh Hawley to add his well-meaning, but misguided, credit card rate cap bill to the GENIUS Act, now on the Senate Floor. National Taxpayers Union notes our strong opposition to this amendment, and urges all Senators to vote NO. This amendment, based on S.381 (the 10 Percent Credit Card Interest Rate Cap Act), would harm the very people it aims to protect by making it unaffordable to provide credit card products to a large percentage of American consumers. The legislation runs counter to basic economic concepts: most notably, the fact that price controls do not work because they cause supply to fall and demand to rise.
The effects from this legislation could be quite large. Millions of Americans could be forced to rely upon alternative sources for loans, such as pawn shops, unregulated lenders, and other loan products. The interest rates charged by these lenders are much higher than credit cards.
In Illinois, where the state imposed a rate cap, Federal Reserve research showed declines of credit availability to higher risk borrowers of at least 38%. In Oregon, where similarly misguided state legislators passed a rate cap proposal, the decline was around 36%. However, the Hawley amendment proposes an even lower rate cap than these states enacted, which would likely lead to declines to credit availability to anyone but the wealthiest and most credit worthy customers.
Credit cards, when used wisely, are an important way for Americans to build a credit history that enables larger loans for homes, cars, and to start businesses. Credit cards open the doors for lower income Americans to build a better life, but this bill would shut that door.
We urge all Senators to vote “NO” on this misguided amendment when it comes up for a vote.