That cap, proposed earlier this month by President Donald Trump, would slow consumer spending and limit credit availability, Moynihan said in a Thursday (Jan. 22) interview with Bloomberg Television.
However, the CEO said the affordability issues behind the proposal are legitimate and that Bank of America (BofA) has been in talks with the White House on the subject.
“If you actually make this a policy, it can re-allocate credit,” he said. “That will slow down spending, it will slow down credit availability, and that might not be what you’re trying to achieve.”
Trump had called for a one-year, 10% cap earlier this month, aiming for it to go into effect Jan. 20. That deadline, as Bloomberg notes, came and went without many changes to the industry. Trump has since said he would ask Congress to make his proposal happen.
Banks and the banking industry contend that the cap would cause them to pull back on credit, leaving consumers to turn to less reliable and more expensive avenues like payday loans.
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“Even one year, if you had to go reshuffle the whole deck, that would be pretty interesting and cause a lot of change in people’s views of what they have available for credit,” Moynihan said.
His comments echo those of JPMorgan Chase CEO Jamie Dimon, who also spoke on the topic at Davos this week.
“It would remove credit from 80% of Americans, and that is their back-up credit,” Dimon said.
Also at Davos, Citigroup CEO Jane Fraser told CNBC that she does not expect Congress to support the 10% cap.
“There is a very keen understanding that this would have the opposite impact of what the actual intent would be, and that there are better ways to go about it, and we’re very happy and continue to work on providing them,” Fraser said.
Research by PYMNTS Intelligence has shown the importance of credit to the Labor Economy, which includes the 60 million workers making less than $25 an hour but who account for around 15% of U.S. consumer spending.
The PYMNTS Intelligence report “Wage to Wallet™ Index: Wage Volatility’s $14B Consumer Spending Gap” found that 33.8% of workers in this cohort always or usually carry a revolving credit balance. For the larger population, that number is under 25%.
