Top executives from the nation's largest financial institutions issued warnings this week during fourth-quarter earnings calls, arguing that President Donald Trump's proposed 10% cap on credit card interest rates would backfire.
The Trump administration framed the proposal as a populist measure to provide relief to debt-burdened Americans.
However, banking leaders claim a 10% ceiling—well below current market averages—would force them to stop lending to millions of high-risk borrowers and could trigger a broader economic slowdown.
"A Significant Slowdown"
Citigroup Inc. (NYSE:C) outgoing CFO Mark Mason was among the most direct during a call with reporters on Wednesday.
"An interest rate cap is not something that we would or could support, frankly," Mason said, per Yahoo Finance.
He warned that the mandate would "likely result in a significant slowdown in the economy."
Mason acknowledged that "affordability is clearly an important issue," taking a more diplomatic tone and adding that Citigroup "looks forward to collaborating with the administration" on alternative solutions.
"Extensive and Broad" Loss of Access
JPMorgan Chase & Co. (NYSE:JPM) CFO Jeremy Barnum argued that instead of making debt cheaper, the cap would simply make debt unavailable.
"What's actually simply going to happen is that the provision of the service will change dramatically," Barnum said. "Specifically, people will lose access to credit, like on a very, very extensive and broad basis, especially the people who need it."
Barnum characterized the proposal as a "severely negative consequence for consumers" and for the national economy.
"Instead of lowering the price of credit, it will simply reduce the supply of credit," he added.
A Threat to the Credit Ecosystem
Delta Air Lines, Inc. (NYSE:DAL) CEO Ed Bastian noted that the cap could “upend the whole credit card industry.”
Bastian warned that the policy would “restrict the lower-end consumer from having access to any credit,” potentially threatening the rewards and loyalty programs that millions of travelers rely on.
Bank of America Corp. (NYSE:BAC) CEO Brian Moynihan joined the chorus, stating that the correlation between interest caps and credit availability is unavoidable.
"If you bring the caps down, you’re going to get restricted credit, meaning less people will get credit cards, and the balance available to them on those credit cards will also be restricted. And so you have to balance that against what you’re trying to achieve on affordability," Moynihan said.
The Road Ahead
Trump's proposal, which would cap rates at 10% for a one-year period, has become a central pillar of the president’s economic agenda.
However, with giants in the financial sector signaling a complete lack of support, the administration may face resistance from Wall Street.
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