Bank executives faced significant challenges following President Donald Trump’s announcement that American credit card companies would be limited to a 10% cap on interest rates, effective January 20. This news led to declines in the stock prices of major banks including Citigroup, JPMorgan Chase, Wells Fargo, and Bank of America, with losses ranging from 1% to 4% during early trading. Financial institutions most closely linked to credit cards, like Visa, Mastercard, and American Express, also saw their stocks fall. Notably, Capital One’s shares dropped nearly 7%, reflecting its heavy reliance on credit card loans.
Industry analysts have cautioned that such a cap could seriously undermining profitability in the credit card sector, particularly for customers with lower credit ratings. The proposal, if implemented, may result in lenders pulling back from offering credit to subprime borrowers, curtailing access to credit and potentially reducing consumer spending. A banking source highlighted that maintaining a portfolio under these conditions would be untenable, suggesting that the proposal could have chilling effects on the economy.
As the cap’s implementation method remains uncertain—be it through legislation or by regulatory means—industry observers warn of unintended consequences. They argue that limiting interest rates might lead to diminished credit availability, adversely impacting millions of consumers and small business owners who depend on credit for daily transactions. Previous attempts to regulate credit card fees have met with resistance, indicating that the current proposal may provoke further debate and scrutiny.
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