Cortez, Sanders interest cap: option for consumers and workers.
Sen. Bernie Sanders and Rep. Alexandria Ocasio-Cortez have a new target: credit card companies.
The lawmakers, who identify as democratic socialists, unveiled a plan Thursday to cap credit card interest rates at 15%. The measure aims to cut current rates significantly: the national average annual percentage rate hit 17.73% this month, while the median was 21.36%, according to CreditCards.com.
“Today, we’re telling Wall Street and the payday lenders that enough is enough,” Sanders said in joint remarks with Ocasio-Cortez streamed on Twitter. The Vermont independent told The Washington Post, which first reported the plan, he was “sure” it would face criticism, but added, “Maybe Congress should stand up for ordinary people.”
Speaking to potential criticism, Ocasio-Cortez said 15% interest on credit cards “is a lot.” She argued that “you can run a bank” and “continue to be profitable” at those levels.
The measure will have a tough time getting through Congress, particularly the Republican-held Senate. The banking industry will likely oppose it. But the proposal still sends a message: it comes amid a 2020 Democratic presidential primary in which contenders have tried to cast themselves as the strongest champion for workers and consumers.
Sanders has made his case for the presidency in large part by calling out what he calls corporate greed and the need for better protections for workers and consumers. Ocasio-Cortez, a first-term representative from New York, has caused a stir during her short tenure by embracing dramatic proposals, such as the Green New Deal, to overhaul the U.S. economy and tax system.
Sanders’ office did not immediately respond to a request to comment on the legislation. CNBC could not immediately reach Ocasio-Cortez’s office.
The American Bankers Association, a trade group for the banking industry, criticized the proposal.
“Today consumers benefit from a highly competitive and vibrant credit market,” ABA spokesman Jeff Sigmund said. “It would be a mistake for the government to artificially limit those choices. This specific proposal will only harm consumers by restricting access to credit for those who need it the most and driving them toward less regulated, more costly alternatives.”
The bill comes amid mounting debt in the U.S. Outstanding consumer debt topped $4 trillion for the first time in February, CNBC previously reported.
Nearly 90% of Americans support a cap on interest rates that financial institutions can charge on credit cards, according to a February survey from CompareCards. Matt Schulz, chief industry analyst at CompareCards, said “many people don’t understand that there already is a credit card cap in America, it just doesn’t apply to banks.” Rates for credit union credit cards cannot top 18%, he said.
The Sanders and Ocasio-Cortez plan fits into a campaign strategy already deployed by Sanders and Sen. Elizabeth Warren, a Massachusetts Democrat and consumer advocate. They have not only put forward policies designed to boost consumers, but also criticized former Vice President Joe Biden — who has led most early polls in the Democratic primary — for being too cozy with Wall Street and credit card companies. Financial companies have a large presence in Delaware, which Biden represented in the Senate for decades.
Warren has said Biden was “on the side of the credit card companies” during a fight over a bill, passed in 2005 with Biden’s support, which made it harder for individuals to declare bankruptcy and wipe out debt. Biden campaign spokesman Andrew Bates previously told Vox that, because the legislation “was a certainty” to get through the GOP-held Congress and White House, Biden worked to win “important concessions for middle class families” as part of the plan.