In 1980, Citibank relocated its credit card operations from New York to South Dakota after the state eliminated its usury ceiling. Within a decade, every major issuer followed. The average credit card APR in 1980 was around 17%. Today it is 22%, and delinquencies are at their highest level in 13 years. The 40-year experiment in deregulated consumer credit pricing has produced $1.2 trillion in revolving debt and 111 million Americans who cannot pay their balance in full each month. The experiment failed. A 10% cap is not radical. It is overdue.
The Risk Is Already Here
JPMorgan's Jeremy Barnum warns that a cap would cut off credit "especially the people who need it the most." He is right that subprime borrowers face the biggest access question. But what exactly is the value of access to a product that charges 28% to someone earning $40,000 a year? A household carrying $6,000 at that rate pays roughly $1,680 annually in interest alone, nearly a full month of after-tax income for a median-wage worker. That is not credit access. That is a debt trap with a Visa logo.
The banking lobby's catastrophe scenario, 190 million cardholders losing access, assumes issuers would rather exit than restructure. History says otherwise. When the CARD Act passed in 2009, banks predicted the same apocalypse. Credit supply contracted modestly and temporarily. Within 2 years, issuers adapted their models, tightened underwriting, and returned to growth with lower loss rates. The sky did not fall.
I will concede this: a 10% ceiling sits well below typical charge-off rates, which means the math genuinely does not work for the riskiest borrowers at that price point. Fair point. But the conclusion that follows is not "abandon the cap." It is "redesign the underwriting." Banks have spent decades optimizing for volume over credit quality because high rates made bad loans profitable. Strip the rate cushion and you force the industry to lend responsibly or not at all. Both are better outcomes than the status quo.
Follow the Margin, Not the Narrative
Look at who opposes this cap and what their margins look like. The top 6 card issuers posted net interest margins on card portfolios above 10% last year. Synchrony Financial's card yield exceeded 30% in its most recent 10-K. These are not institutions operating on razor-thin economics that a rate cap would destroy. They are institutions whose profit model depends on borrowers staying in debt as long as possible.
The $368 million in daily excess interest that Americans accrue above a 10% rate does not vanish into a risk reserve somewhere. It funds share buybacks, executive compensation, and rewards programs designed to attract prime borrowers whose balances subsidize nothing. The risk argument is real, but it is also selectively deployed. Banks invoke the fragile subprime borrower when regulation threatens margins, then market aggressively to that same borrower when quarterly targets loom.
Trump posted the idea in January and missed his own deadline. The Sanders-Hawley bill has stalled. None of this surprises me. Consumer protection measures that threaten bank profitability do not die in public debate; they die in committee, quietly, after lobbying spend does its work. The Electronic Payments Coalition did not commission a study showing 190 million affected cardholders because it cares about financial inclusion. It commissioned that study because $240 billion in annual interest revenue is worth protecting.
A 36% state-level cap, modeled on the Military Lending Act, is sometimes presented as the responsible alternative. It targets payday lenders while leaving mainstream card issuers untouched. That is exactly the problem. The mainstream issuers are charging rates that would have been classified as usurious in every state before 1978. Moving the ceiling from the sky to the penthouse is not reform.
The South Dakota experiment gave banks 4 decades of pricing freedom. They used it to build the largest consumer debt bubble in American history. A 10% cap would hurt. It should.
