On February 4, Senators Bernie Sanders (I-Vt.) and Josh Hawley (R-Mo.) introduced bipartisan legislation aimed at immediately capping credit card interest rates at 10% for a period of five years. This initiative follows a recent Forbes report indicating that the average credit card interest rate stands at 28.6%.

According to Senators Sanders’ press release, American households collectively hold a record-breaking $1.17 trillion in credit card debt. As of 2023, the average household with credit card debt owed over $21,000. The delinquency rate for credit cards issued by commercial banks is approximately 3.23%, the highest since the aftermath of the Global Financial Crisis in 2011.

In his press release announcing the legislation, Senator Hawley remarked, “Working Americans are drowning in record credit card debt while the biggest credit card issuers get richer and richer by hiking their interest rates to the moon … Capping credit card interest rates at 10%, just like President Trump campaigned on, is a simple way to provide meaningful relief to working people.”

According to Senator Sanders, the impact of the legislation could be substantial. For instance, a $5,000 credit card balance at a 28% interest rate, with minimum monthly payments of $166, would take over 24 years to pay off and accrue nearly $11,000 in interest. Under the proposed 10% cap, the same balance would reduce the interest paid by over $7,000.

This is not the first attempt by Senator Hawley to legislatively cap credit card interest rates. In September, 2023, Senator Hawley introduced the “Capping Credit Card Interest Rates Act” (S.B.2760), which would have capped annual percentage rates at 18%, and expressly prohibited non-finance charge fees from being used to evade the limitation. This bill died in committee. It remains to be seen whether Senators Sanders’ and Hawley’s new legislation will face a different reception in the new Congress.

Our Take:

People have speculated about the possibility of some of the more populist-oriented Republican party potentially having points of alignment with some of the more consumer protection-oriented Democrats. This may be an example of that potential alignment coming to fruition. And although we continue to believe the likelihood of this legislation being enacted is low, its proposal is a sign that there could be some legislative — or more likely, regulatory — priorities that a populist Republican administration might move forward on that would be opposed by industry.