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

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Regular Contributor

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


@myscorerocks wrote:

YES!!

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


There is a good chance this will destroy credit card rewards programs we all know and love.... as well as any incentive to maintain credit worthiness...




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Message 11 of 29
Community Leader
Valued Contributor

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


@pipeguy wrote:

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. 


I like the way you think. I agree very much with what you didn’t say lol

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Message 12 of 29
Regular Contributor

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

This is great news. People complaining about people with lower scores not getting CC's or whatever, guess what? It is already like that now! That's why most people on here rebuilding start with Secured CC's. Nothing will change except you won't be beholden to rates that make Loan Sharks look like honest players.

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Message 13 of 29
Valued Contributor

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

This proposal does not stand a chance of passing and it has nothing to do with the party that currently controls the Senate.  I can remember when the current frontrunner for the nomination used to be derisively called "the Senator from MBNA."  There was a very good reason for that nickname.





Message 14 of 29
Moderator Emeritus

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


@MrCrabs wrote:

This is great news. People complaining about people with lower scores not getting CC's or whatever, guess what? It is already like that now! That's why most people on here rebuilding start with Secured CC's. Nothing will change except you won't be beholden to rates that make Loan Sharks look like honest players.


https://www.bankofamerica.com/credit-cards/products/secured-credit-card/

 

Notice that's 10% higher than 15% already.

 

It'll take a 720 FICO just to get a secured card in that world... or secured cards will come with AF's that make even the CSR AF look typical.  That and the crushing debt which people are generally complaining of isn't coming from credit cards... not only is this particular idea full of unintended consequences it won't change things like health care or education expenses which are beyond absurd already.

 

Fact is everything is expanding to fill all available dolllars of the cash cow that is the American consumer and it goes way beyond just the banks or even PDL places which I agree need to be slapped hard, if expenses are reduced on credit cards guess what, other things will raise prices because they can.

 

Ultimately the credit market needs to be expanded if we want to fix issues like declining home ownership (which matters far more to financial health of consumers), and this idea does the exact opposite.  Nobody wins on this one, certainly not consumers. 

 

Well maybe the politicians chasing sound-bites. 




        
Message 15 of 29
Valued Contributor

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

I don't think we need legislation to cap interest rates, because no one is forcing anyone to pay it. They choose to for whatever reasons.

Simply be responsible with your credit, and a person can always call in to lower their APR. They actually used to be pretty good years ago, then something happend in 08 I believe. And that's when CC APRs started rising steadily. Now we see a lot of them topping out at 27%, not too far from Store cards or Loan shark interest. With many in the high teens just to start, when prior to 08 you could get almost single digits.

 

So while I do see the need for lower CC interest rates, they do come with responsible financial decisions. Why should someone who works hard to keep their high credit score, essentially have the same APR as a person who's consistantly late has high util etc. ?

 

Its basically the same thing as everything else in life(or should be), you're rewarded for for your actions/good behavior. Not the reverse.

 

High interest rates should be a deterant for CC debt, yet many do not give it a second thought.

Message 16 of 29
Regular Contributor

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


@Revelate wrote:

@MrCrabs wrote:

This is great news. People complaining about people with lower scores not getting CC's or whatever, guess what? It is already like that now! That's why most people on here rebuilding start with Secured CC's. Nothing will change except you won't be beholden to rates that make Loan Sharks look like honest players.


https://www.bankofamerica.com/credit-cards/products/secured-credit-card/

 

Notice that's 10% higher than 15% already.

 

It'll take a 720 FICO just to get a secured card in that world... or secured cards will come with AF's that make even the CSR AF look typical.  That and the crushing debt which people are generally complaining of isn't coming from credit cards... not only is this particular idea full of unintended consequences it won't change things like health care or education expenses which are beyond absurd already.

 

Fact is everything is expanding to fill all available dolllars of the cash cow that is the American consumer and it goes way beyond just the banks or even PDL places which I agree need to be slapped hard, if expenses are reduced on credit cards guess what, other things will raise prices because they can.

 

Ultimately the credit market needs to be expanded if we want to fix issues like declining home ownership (which matters far more to financial health of consumers), and this idea does the exact opposite.  Nobody wins on this one, certainly not consumers. 

 

Well maybe the politicians chasing sound-bites. 


That is just hyperbole, all 1st world countries have similar laws and the sky hasn't fallen. Putting predatory lenders like payday lenders out of business is a good thing and if CC companies want to stop serving customers and go belly up by requiring 720 FICO for a secured card(silliest thing i've ever heard as a counter argument to anything) they can go too as a better & smarter company will just take their market share and put them out of business.

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Message 17 of 29
Contributor

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

Probably won't help much, since people tend to look at the payment amount, and will just run up their balances higher. Odd that she calls it greedy to charge 17% to lend someone your money, but thinks no percentage the government charges to use your own money can be too greedy

Message 18 of 29
Established Contributor

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

If Washington really wanted to make a difference... Payday, car title loans and the like should be reeled in big time! Some of these loans can exceed 1200%!!! Most of these types of establishments seem to exist in poorer neighborhoods, where people are more likely to be scouring to make ends meet and prey on those without a whole lot of options, and quite honestly, not a complete understanding of just what using these places get them into. While as said before, no one holds a gun to anyones head... When you have a choice between keeping the landlord at bay or keeping food in the fridge, these places may seem to be the answer... But it only rolls the snowball further down the hill, making the snowball bigger and much more difficult to push back up.

 

Bringing back Economics to high school curriculum wouldn't be a bad idea either. Teaching how to use credit responsibly and how credit scoring and reports work around the 17 year old mark could help many young adults from being "sub-prime" in the first place.

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Message 19 of 29
Community Leader
Valued Contributor

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


@fuzzle wrote:

Probably won't help much, since people tend to look at the payment amount, and will just run up their balances higher. Odd that she calls it greedy to charge 17% to lend someone your money, but thinks no percentage the government charges to use your own money can be too greedy


Amen to that lolol

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Message 20 of 29
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