Democratic presidential candidate Sen. Bernie Sanders and New York Rep. Alexandria Ocasio-Cortez moved today to introduce legislation that would cap rates on credit cards and other consumer financial services at 15 percent.
In an announcement on Thursday (May 9), Sanders and Ocasio-Cortez accused banks and other credit card issuers of acting as “modern-day loan sharks.” In addition to capping interest rates on credit cards, the proposed legislation would turn roughly 30,000 post offices into providers of low-cost basic financial services, including checking accounts, savings accounts and some loans. The cap would also apply to payday (and other short term) loans.
The 15 percent mark, they said, was selected to match the interest rate cap already that already exists for cards issued by credit unions.
An outline of the plan released ahead of their formal announcement sharply criticized banks for charging on average more than 17 percent interest on credit card balances, in an environment in which they are able to borrow money at less than 2.5 percent.
“Today’s loan sharks wear expensive suits and work on Wall Street, where they make hundreds of millions of dollars in total compensation by charging sky-high fees and usurious interest rates,” Sanders and Ocasio-Cortez said in a statement on the proposed legislation.
Sanders and Ocasio-Cortez cited data from CreditCards.com to support their assertion that the average interest rate on credit card debt is roughly 17 percent and that sub-prime card holders often pay rates that are higher.
Sanders is currently one of 21 Democratic candidates running for president, and has staked out a position as the furthest left-leaning candidate in the race. He sits solidly in second place, with front-runner and former Vice President Joe Biden holding a commanding lead in first — and a much more moderate take on regulating the banking industry. Sanders also faces competition from Sen. Elizabeth Warren of Massachusetts, who’s built her reputation as a harsh critic of Wall Street and consumer advocate who singlehandedly spearheaded formation of the Consumer Financial Protection Bureau (CFPB).
The legislation is also sure to stir up strong resistance from the banking industry, which brought in $113 billion in interest and fees from credit cards last year — up 35 percent since 2012, according to S&P Global Market Intelligence.
For his part, however, Sanders seems aware that a fight is coming — and perhaps it is one he is looking forward to having during the course of his presidential run.
“I am sure it will be criticized,” Sanders said of the legislation. “I have a radical idea: Maybe Congress should stand up for ordinary people.”