Sen. Bernie Sanders (I-VT) and Rep. Alexandria Ocasio-Cortez (D-NY) are teaming up on a bill to cap credit card and payday loan interest rates at 15%, a significant reduction from current lending rates.
“The American people are sick and tired of being ripped off by the same financial institutions that they bailed out ten years ago,” the pair said in a joint statement. “If we are going to create a financial system that works for all Americans, we have got to stop financial institutions from charging outrageous interest rates and fees.”
Sanders has introduced similar legislation in the past, including a 2009 push to include similar caps. But the bill sets up a nice contrast in the 2020 presidential primary for Sanders as he increasingly turns his attention to former Vice President Joe Biden, who fought to help his home-state credit card industry at times throughout his career.
The bill, which the pair will officially introduce Thursday afternoon, would seek to roll back four decades of increasing credit card rates that consumer advocates and economists say have disproportionately hurt minorities and working-class people who are less likely to pay off their credit cards on time every month.
In 1978, the Supreme Court overturned a century of state laws protecting against usury by ruling that states could set their own interest rate laws and companies within those states could sell across state lines. That led to a race for states like Delaware and South Dakota to dramatically weaken their laws to draw credit card companies.
Average credit card interest rates have climbed to new highs in recent years, reaching a median rate of 21.36% last week, according to creditcards.com, which tracks credit card rates. That’s a point higher than last year and almost double the 12.62% average from a decade ago. That’s led to huge profits for the industry, which brought in $180 billion of profits on credit card interest and fees alone last year.
Payday loans would also be subject to these rules, which could essentially end the industry. Those short-term loans often have interest rates above 400%, and disproportionately impact poor people and minorities.
The bill faces a tough path in Congress, given how much resistance they’d face in the Republican-controlled Senate, not to mention from Democrats in states with large credit card industries.