The New Proposal Will Lower Interest Rates

Democratic presidential candidate and Vermont Senator Bernie Sanders and Alexandria Ocasio-Cortez, the freshman Congresswoman from New York, want to cap credit card interest rates at 15 percent–a much lower rate than currently permitted by law. The legislation is sure to meet strong resistance from the banking lobby, which makes billions of dollars off of credit card interest each year.

“Sanders, the Vermont senator running for the Democratic nomination for president, told The Washington Post in an interview that a decade after taxpayers bailed out big banks, the industry is taking advantage of the public by charging exorbitant rates,” The Washington Post reports. “Ocasio-Cortez (D-N.Y.) will introduce the House version of the bill. In addition to a 15 percent federal cap on interest rates, states could establish their own lower limits under the legislation.”

Right now, the average interest rate for credit cards is a little over 21 percent, up from 12.6 percent a decade ago, according to the Washington Post. By putting a legal cap on interest rates, Sanders said Congress will be standing up for “ordinary people.” Credit card companies generally charge higher interest rates to people with lower credit scores–and those people tend to be poor or working-class.

“For borrowers with high credit scores, the average rate was 17.73 percent last week, compared with 16.71 percent a year ago. For those with poor credit scores, the average is now about 24.99 percent, compared with 23.77 percent a year ago,” The Washington Post reported.

Consultants for the credit card industry told the Washington Post that customers with lower credit scores pose a bigger risk to credit card companies, and therefore the higher interest rates are justified.