JPMorgan Chase and other major U.S. banks have issued stark warnings following former President Donald Trump's proposal to impose a one-year cap on credit card interest rates at 10%. Announced via Trump's Truth Social account, the policy aims to address cost-of-living concerns ahead of the congressional elections but has triggered a sharp selloff in financial stocks and drawn fierce criticism from the banking industry.
JPMorgan Chief Financial Officer Jeremy Barnum stated during an earnings call that such a cap would be "very bad for consumers, very bad for the economy," forcing the lender to reduce credit availability. He argued the measure would have the opposite effect of its intended goal. Industry groups, including the Electronic Payments Coalition, project that between 82% and 88% of open credit card accounts could be closed or severely restricted under a 10% cap, disproportionately affecting subprime borrowers.
The proposal comes as the average credit card interest rate stands near 21%, according to Federal Reserve data. Banks contend that these rates are necessary to compensate for default risk and support lending across the credit spectrum. Citigroup CFO Mark Mason warned of "a restriction on providing credit... to those who need it most," while Wells Fargo's Mike Santomassimo predicted a "significant negative impact" on credit availability and economic growth.
Market reaction was immediate, with the KBW Bank Index falling 0.9% and shares of JPMorgan, Citigroup, Capital One, and American Express declining. The political response has been mixed. While some Democrats like Elizabeth Warren and Bernie Sanders have long supported rate limits, House Speaker Mike Johnson cautioned about "negative secondary effects." Policy researchers are divided; some, like Brian Shearer of Vanderbilt University, argue banks have ample profit margins to absorb lower rates, potentially saving consumers $100 billion annually.
Implementation remains a major hurdle. Analysts note that a nationwide cap would likely require congressional approval, which faces significant bipartisan resistance. Barnum indicated JPMorgan would consider "all options," including legal action, if the policy moves forward without sufficient justification. For now, the proposal serves as a political signal, reigniting debate over government intervention in consumer credit markets and introducing new uncertainty for financial institutions.
