Sanders, Ocasio-Cortez Propose 15% Cap on Credit Card Interest

[myscorerocks]

YES!!

https://www.bloomberg.com/news/articles/2019-05-09/aoc-bernie-sanders-credit-card-interest?cmpid=soc...

[marty56]

Let see.  My CU Mactercard is %12.15 based on my current scores and would have been %15 when I was subprime.  Sure.

This will have a negative effect on those with less then perfect credit and again much of the profits goes back into share holders, 401k's and being ablle to loan more money out  not into the pocket of Mr/Ms CU.

We have had a lot in CC reform which has stopped most of the game playing with where a payment was applied and perhaps there is room for improvement but this will hurt everyone in the long run.

I would suggest the if Ms. AOC wants a better interest rate on her CC, they she probably needs to come her and to learn how to improve her credit score just like we all did.

[pipeguy]

Impossible to answer or truly comment on this proposal without discussing the "politics" so I'll only say this is dead on arrival and will never get through the Senate - I'd be surprised if it even passed in the House even with the current party makeup. Note that I'm not saying that I'm for or against this proposal, I'm just saying it is NOT going to become law, and it would have to overturn a SCOTUS case too.  

https://en.wikipedia.org/wiki/Marquette_National_Bank_of_Minneapolis_v._First_of_Omaha_Service_Corp.

Be careful what you wish for, a 15% apr cap would kill all sub-prime lending, kill most store card lending, and limit approvals to 720+ credit scores all with lower credit limits. Credit Card debt is packaged and resold through the bond market capping "margins" would in fact limit total credit card lending.

https://en.wikipedia.org/wiki/Securitization  

Here is an interesting link from a Federal Reserve Report dated 1978 - https://www.minneapolisfed.org/research/qr/qr221.pdf

I could write a 2,000-word article on free markets, wage and price controls and government mandates such as everyone deserves a mortgage/house and we know how well that worked, but I can't honestly write one without including the politics of why these policies always fail. MyFico is not the place for political discussion even if relevant to economics - it's also against MyFico rules - I'll just leave it with the background links I posted. 

Note that the USPS offering banking services were floated in the 114th Congress (2015-2016) and I thought it was a good idea since the USPS already does money orders, etc. That being said in 2017 USPS management dropped the proposal and is no longer interested in offering banking services. 

[myscorerocks]

Actually, I'm seeing people with 700+ with higher interest rates (myself included). In fact, I saw someone post yesterday with scores around 820 with a interest rate around 17%. **bleep**? So, I'm going to have to disagree. I think this is beneficial for all. It seems you're relating to this post politically. We bailed out the banks and yet they're still charging people 20-50%. That's WRONG. I would love to see your facts explaining your assertions. 

[MakingProgress]

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@marty56 wrote:

Let see.  My CU Mactercard is %12.15 based on my current scores and would have been %15 when I was subprime.  Sure.

This will have a negative effect on those with less then perfect credit and again much of the profits goes back into share holders, 401k's and being ablle to loan more money out  not into the pocket of Mr/Ms CU.

We have had a lot in CC reform which has stopped most of the game playing with where a payment was applied and perhaps there is room for improvement but this will hurt everyone in the long run.

I would suggest the if Ms. AOC wants a better interest rate on her CC, they she probably needs to come her and to learn how to improve her credit score just like we all did.

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No quite sure where the extra profit is going to come from.   I think the real negitive here is that the banks will probably tighten underwriting and those just starting out or rebuilding will not have as much access to credit.   The banks are less likely to take a chance on  subprime customers if they don't have as easy of a way to recoop some of their losses. 

[Anonymous]

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@myscorerocks wrote:

Actually, I'm seeing people with 700+ with higher interest rates (myself included). In fact, I saw someone post yesterday with scores around 820 with a interest rate around 17%. **bleep**? So, I'm going to have to disagree. I think this is beneficial for all. It seems you're relating to this post politically. We bailed out the banks and yet they're still charging people 20-50%. That's WRONG. I would love to see your facts explaining your assertions. 

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I've never encountered a credit card or banking product that held a gun to my head and forced me to sign an agreement.

[marty56]

Also watch happens to those 0% BT or check offers  and 5 year store cards at 0% if they do this.

[FinStar]

Just a friendly reminder that it's fine to discuss any possible changes that may impact interest rate caps, but we are not allowed to discuss politics on myFICO so any and all discussions must steer clear of that.

-FS

The 5 Things We Don't Talk About

[Anonymous]

I think this would have the unintended consequence of making credit much harder to get, especially for lower income and higher risk consumers. 

Also keep in mind that nobody HAS to pay that APR — we have grace periods for a reason. If people would budget better, this would not be an issue. 

But it is a moot point since it is definitely DOA. 

[Revelate]

Sigh, subprime unsecured lending would lose it's ass at 15%.  Subprime auto too come to think of it, people are going to have to come up with a 30% DP to buy a car.

What's going to happen if the post office now is the only one that's going to loan to 660 and lower FICO scores, and they're left holding the bag with a 20% default rate or worse on the lower credit tranches?

Now it's the tax payer bearing the burden rather than the individual consumer: read as middle and mass affluent classes... I'm fine being responsible for my own credit mistakes, I'm not OK, at all, with being financially responsible for other people's mistakes unless I'm married to said person.

Before anyone jumps all over this given a portion of the APR I'm "charged" (I PIF) by banks is a blended risk average, I can avoid that by basic financial decisions: my taxes going to subsidize other people's defaults, no.