ABA warns on proposed 10% US card rate cap

ABA flags broad impact from proposed 10% APR ceiling

A federal proposal to cap US credit card interest rates at 10% would sharply restrict access to revolving credit for tens of millions of consumers, according to new figures from the American Bankers Association (ABA). The analysis focuses on the “10 Percent Credit Card Interest Rate Cap Act”, sponsored by Senators Josh Hawley and Bernie Sanders, which would impose a 10% annual percentage rate ceiling across the market.

Using data supplied by issuers that together account for roughly 75% of US credit card balances, the ABA estimates that between 137 million and 159 million existing cardholders would no longer be able to use their cards if the cap were implemented. In account terms, the group said between 74% and 85% of active credit card accounts would either be closed outright or face substantial reductions in their credit limits.

The association said state‑level results mirror the national picture, implying similar disruption across regions. It argues that the bill, intended to lower borrowing costs, would instead “effectively eliminate” credit cards as a day‑to‑day payment tool and source of liquidity for many households.

Effects seen extending well beyond higher‑risk borrowers

The ABA maintains that the impact of a 10% cap would not be confined to subprime or higher‑risk consumers. Citing VantageScore data, it said that among cardholders with scores above 600, between 71% and 84% would see accounts closed or credit lines “sharply reduced” under the proposed ceiling. The trade group added that many “super‑prime” customers, with scores above 780, would also be negatively affected.

In the association’s view, lenders would respond to the cap by tightening underwriting and changing product structures. It expects most cardholders, including those who regularly pay balances in full, to encounter lower credit limits, higher fees, reduced rewards and benefits, and fewer low‑rate promotional offers.

ABA president and CEO Rob Nichols said the data show that rate caps tend to lead to “fewer options, higher costs and reduced access – especially for those who can least afford to lose their credit card”. He urged the administration and Congress to weigh what he described as the potential harm to US households and the broader economy, arguing that the measure is “not the solution to the affordability challenge”.

Concerns over shift to less‑regulated credit and spending impact

Beyond the direct changes to card terms, the ABA warns that a 10% APR ceiling could push some borrowers away from highly regulated card products toward alternative forms of credit that are less regulated and often more expensive. It highlights the role of credit cards in providing emergency liquidity and smoothing short‑term cash‑flow shocks for many families.

The group also links card availability to consumer spending and business activity. It notes that small businesses and the wider US economy rely on nearly $3.6 trillion in annual purchases made using consumer credit cards. In its view, restrictions on card credit could reduce spending power and weigh on sectors that depend on card‑funded transactions.

According to the ABA, these potential side‑effects mean that, while the proposed cap aims to address affordability concerns, it could ultimately undermine affordability for a broad range of households by limiting access to revolving credit and altering the structure of card products in ways that raise non‑interest costs.