Trump's proposed credit card cap might destroy GOP in midterms, predicts report

The senior editor of the National Review, Charles C.W. Cooke, has issued a stern warning to President Donald Trump and the Grand Old Party (GOP) over the administration's plan to impose a 10% cap on credit card interest rates. Cooke predicted that the plan could gain popularity in Congress, but if it is implemented, it could prove disastrous for the Republican Party in the midterm elections, as consumers are likely to suffer the consequences of the cap. 

With “affordability” poised to be a key issue in this year’s midterm elections, President Trump is aiming to lower costs for consumers, and his proposed 10% cap on credit card interest rates is a part of these efforts. While it is unclear how the president plans to implement it, he announced that the cap could be in place by January 20. The cap may be pushed onto banks by forcing them to cap interest rates voluntarily or through executive action, which Trump has yet to formulate. 

According to Cooke, the proposal “would likely prove extremely popular” if an opinion poll were taken, the Mediaite reported, citing his article published on the National Review. He predicted that it could gain "80-20 in favor or perhaps more," but if Trump managed to get Congress to pass a law and implement the cap, it would "provoke a populist backlash on a scale that we have not seen in the United States for a while.” 

Cooke added that it is “absurd” to expect that lenders would continue to operate under the “current system" with the 10% interest rate cap, as there is a reason why unsecured loans carry high interest rates, especially for risky debtors. “The result of this would not be some lofty 10-percent-for-everyone paradise, but an extremely selective universe in which only the most secure candidates were accepted,” Cooke wrote, adding that a 10% APR amounted to a limit of “no more than 0.83 percent interest per month.” He predicted that as a result of the cap, most new applicants would be turned down, credit limits would be lowered, and existing customers who exhibit even slight delinquencies would have "their accounts canceled on the spot.” Explaining how this issue will play out on social media in the lead up to the Midterms, Cooke added that the 80-20 approval rate could soon flip on its head "in a matter of weeks." 

Other industry leaders have also opposed the proposal. Recently, in a call with reporters, JPMorgan’s Chief Financial Officer Jeffrey Barnum hinted that the industry was willing to fight with all resources at its disposal to stop the implementation of such a cap, AP News reported. JPMorgan is one of the nation's biggest credit card companies, with its customers collectively holding $239.4 billion in balances.

“Our belief is that actions like this will have the exact opposite consequence to what the administration wants in terms of helping consumers,” Barnum said. “Instead of lowering the price of credit, it will simply reduce the supply of credit, and that will be bad for everyone: consumers, the broader economy, and yes, for us, also," he added. 

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