The chief executive of the largest U.S. bank, JPMorgan Chase, jested Wednesday that a 10% cap on credit card interest rates could be tested in Massachusetts and Vermont to see what happens.
Earlier this month, President Donald Trump called for a one-year cap of 10% on credit card interest rates, to take effect Jan. 20, but nothing came of the suggestion after banking trade groups dismissed the idea.
On Wednesday, Trump renewed his call for Congress to act on a 10% cap, speaking from the World Economic Forum in Switzerland. “They charge Americans interest rates of 28%, 30%, 31%, 32%. Whatever happened to usury?” Trump said.
“I’m asking Congress to cap credit card interest rates at 10% for one year, and this will help millions of Americans save for a home.”
At the same event, JPMorgan CEO Jamie Dimon said a 10% rate experiment would teach many people “a real lesson,” CNN reported. In reality, a rate freeze would be “an economic disaster” in terms of people losing access to credit, he predicted.
JPMorgan is one of the largest U.S. issuers of credit cards and, like other banks, sets interest rates that consumers pay on their balances.
The U.S. government “should force all the banks to do it in two states, Vermont and Massachusetts, and see what happens,” Dimon said, according to CNBC. Dimon’s suggestion to force banks in only those two states to curb their rates drew audience laughter, the media outlet reported.
“The people crying the most won’t be the credit card companies,” Dimon said, according to CNN. “It’ll be the restaurants, the retailers, the travel companies, the schools, the municipalities because people will miss their water payments and this payment and that payment. It would be something else to watch.”
Dimon presumably singled out Massachusetts because Sen. Elizabeth Warren (D-Mass.) supports legislation that would impose a 10% rate freeze, per a bill sponsored by Sen. Bernie Sanders, an independent from Vermont who generally votes with Democrats.
Sanders’ bill proposed last February – and co-sponsored by Sen. Josh Hawley, a Missouri Republican – would impose the cap on card interest rates until 2031. In the House, Rep. Alexandria Ocasio-Cortez, a Democrat from New York City, and Rep. Anna Paulina Luna, a Republican from Florida, introduced similar legislation last March.
The American Bankers Association said in a report released Tuesday that a 10% rate cap would cause as many as 85% of U.S. credit card accounts to be closed “or have their credit lines drastically reduced.” As many as 159 million cardholders wouldn’t be able to use their cards, the ABA said, citing its survey of card issuers.
“We urge the administration and Congress to carefully consider the significant harm a rate cap would have on U.S. households and the broader economy,” the ABA’s chief executive, Rob Nichols, said in a press release. “This is not the solution to the affordability challenge.”
Warren – who spoke with Trump about the rate cap this month – noted in a press release Wednesday that the president’s call for a rate freeze on Jan. 20 had passed without any action by the banks.
“But Jamie Dimon and the world’s richest people did fly their private jets to a ski resort in Switzerland to complain about how bipartisan action to cap credit card interest rates would destroy life as we know it,” Warren said in her press release. “Forgive me if I don’t believe that a banker who made $770 million last year has the best interest of working people at heart.”
Sanders’ office did not respond to an email seeking comment.
