Trump's 10% Interest Rate Cap On Credit Cards Will 'Likely Bring On A Recession,' Says Capital One CEO: $6 Trillion Consumer Spending At Stake

Capital One Financial Corp. (NYSE:COF) CEO Richard Fairbank issued a stark warning about the potential consequences of President Donald Trump’s proposed 10% cap on credit card interest rates, saying the move could severely restrict consumer access to credit and destabilize the broader economy.

Trump’s Proposal Will Lead To A ‘Recession’

During the company’s fourth-quarter earnings call on Thursday, Fairbank argued that “putting a price control in place” will not make credit more affordable, but would instead make credit “less available for consumers, up and down the credit spectrum.”

“This is far more than a subprime issue,” he said, adding that banks would be “compelled to immediately slash credit lines, restrict accounts, and limit new originations to a very small subset of consumers.”

Fairbank pointed to the outsized role that consumer credit plays in the U.S. economy. “Consumers are the backbone of the American economy,” he said, noting that 70% of the country’s GDP is driven by consumer spending and “$6 trillion of that spending is on credit cards.”

He warned that a “material contraction in available credit would likely cause shocks throughout the economy,” arguing that the resulting pullback in spending “would likely bring on a recession.”

Fairbank also cited broader consequences, including risks to retailers, airlines, and hotels dependent on card programs. “Credit cards are many consumers’ initial entry point into building a credit history,” he said. “For many consumers, a credit card is their only access to credit.”

“We feel strongly that a cap on interest rates would catalyze a number of unintended consequences,” Fairfield concluded by saying.

Capital One Most Vulnerable To Rate Caps

According to analysts, Capital One is among the “most vulnerable” to caps on interest rates, given its heavy reliance on revolving credit card balances and net interest income.

The company reported $279.6 billion in period-end credit card loans, which accounts for the largest share of its total loan portfolio at $453.6 billion.

Other Experts Caution Against Rate Caps

Fairbank’s warnings follow several other economists and industry experts who have warned against Trump’s interest rate caps on credit cards.

This includes JP Morgan Chase & Co. (NYSE:JPM) CEO Jamie Dimon, who said the proposal “would remove credit from 80% of Americans,” warning that it will lead to “economic disaster,” while speaking at the World Economic Forum in Davos on Wednesday.

John Garner, founder and CEO of banking rewards management platform Odynn, told Benzinga that consumers with less-than-perfect credit would feel the impact of the proposal first. He said, “A 10% APR cap sounds great at first, but the downsides hit fast,” adding that “This isn’t leveling the playing field—it’s shrinking it.”

Capital One Drops On Q4 Earnings Miss

Capital One released its fourth-quarter results on Thursday, reporting $15.58 billion in revenue, up 52.92% year-over-year, and ahead of consensus estimates at $15.48 billion.

The company, however, missed on earnings, at $3.86 per share, falling short of analyst consensus estimates at $4.11 per share.

As a result, the stock is down 3.31% after hours, despite ending up 1.76% at $235.07 during the regular session. The stock does poorly on Momentum in Benzinga’s Edge Stock Rankings, but has a favorable price trend in the Medium and Long terms.

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