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In an unexpected twist in the political landscape, two Millennial congresswomen from opposing parties have joined forces to tackle a pressing issue affecting millions of Americans: exorbitant credit card interest rates. Representatives Anna Paulina Luna (R-Fla.) and Alexandria Ocasio-Cortez (D-NY), both 35, unveiled a legislative proposal aimed at capping credit card interest rates at a maximum of 10%.
This initiative echoes a similar proposal made by former President Trump during his 2024 campaign, highlighting a rare moment of bipartisan agreement on consumer financial protection.
Understanding the impact of high interest rates
The current average credit card interest rate stands at a staggering 28.71%, nearly three times higher than the proposed cap.
This alarming statistic reflects a broader trend that has seen interest rates soar since the COVID-19 pandemic, which triggered inflation and economic instability. Luna emphasized the need for reform, stating, “For too long, credit card companies have abused working-class Americans with absurd interest rates, trapping them in an almost insurmountable amount of debt.” The proposed legislation seeks to provide immediate relief to consumers struggling under the weight of high-interest debt.
Legislative history and economic concerns
Ocasio-Cortez has previously championed similar measures, including a 2019 bill that aimed to cap interest rates at 15%. She argues that high-interest credit cards perpetuate cycles of debt, particularly for working families. However, the proposal has sparked significant debate among economists and financial experts.
Critics warn that imposing an artificial cap on interest rates could lead to unintended consequences, such as reduced access to credit for millions of Americans. The American Bankers Association, along with 52 state banking groups, expressed concerns that such regulations could restrict lending and harm consumers in the long run.
Potential ramifications of a credit cap
Experts like Arpit Gupta, an associate professor of finance at New York University, caution that interest rate caps may lead to credit rationing, particularly affecting low-income borrowers. “What we don’t know is whether this may actually be a good thing for some low credit score borrowers in a behavioral debt trap,” Gupta noted.
Similarly, economist C. Kirabo Jackson from Northwestern University stated that while a cap at 30% might be beneficial, a 10% cap is too low and could result in fewer lending opportunities for those who need it most.
As the legislation moves forward, it remains to be seen whether it will gain traction in Congress. With the political climate constantly shifting, the collaboration between these two lawmakers serves as a reminder that consumer protection can transcend party lines. As discussions continue, the fate of this proposed cap will undoubtedly impact the financial landscape for countless Americans.
