President Donald Trump dropped a bombshell on the banking world last Friday. “Please be informed that we will no longer let the American Public be ‘ripped off’ by Credit Card Companies that are charging Interest Rates of 20 to 30%, and even more,” he announced on social media, calling for a one-year, 10 percent cap on rates to be implemented on January 20, 2026.
What the president did not explain is how the cap would be put in place — or whether he even has the power to implement such an edict.
What do we know so far about President Trump’s proposal, how has the financial services community — and, more specifically, the banking sector —reacted, and how likely is it that the cap will be implemented?
Let’s take a look.
What We Know About the President’s Interest Rate Proposal
President Trump is correct: credit card interest rates are soaring. Indeed, according to a Consumer Financial Protection Bureau (CFPB) report issued to members of Congress this month, credit card interest rates have climbed to their highest levels in at least a decade. Traditional consumer credit cards now average a 25.2 percent annual percentage rate (APR). Store credit card rates average 31.3 percent.
President Trump said he would cap these rates at 10 percent, “effective January 20.” He also said credit card lenders would be “in violation of the law” if they didn’t comply.
Beyond those parameters, however, he offered little in the way of details. Will this policy come in the form of an executive order on affordability, which is rumored to be in the offing for next week? Will the White House attempt to negotiate directly with issuers to cap rates? Will President Trump call on federal regulators to issue a rules effectuating a credit card interest rate cap? Or does he want members of Congress to approve legislation?
We don’t have answers to these questions. But what we do know is the current system by which the credit card industry is governed.
Credit-card interest rates are regulated under several federal laws. Barring voluntary adoption of a cap on interest rates, which seems highly unlikely (but more on that in a bit), it appears that the policy would require an act of Congress, rather than an executive order or mere White House threats, to implement.
We also know that President Trump’s proposal to bring down credit card interest rates is part of a midterm election-year affordability agenda. (To be sure, when running for the White House in 2024, President Trump also talked about high interest rates.) As part of this agenda, President Trump has also ordered the government to purchase $200 billion in mortgage-backed securities in an effort to lower mortgage interest rates. To lower housing prices, he has also proposed a policy to keep large institutional investors from buying single-family homes. The legality and implementation of these policies, too, is unclear.
How Has The Banking Sector Reacted To The Rate Cap?
In a word? Badly. Industry interest groups are threatening to litigate if this policy is issued in the form of an executive order. (A formalized rulemaking process also would almost certainly result in a lawsuit as well.)
Shortly after the president issued his social media post on Friday, banking industry trade associations issued a joint letter saying a 10 percent cap would “be devastating for millions of American families and small businesses who rely on and value their credit cards.” According to AXIOS, JPMorgan Chief Financial Officer Jeremy Barnum told reporters, “Instead of lowering the price of credit, we’ll simply reduce the supply of credit, and that will be bad for everyone: consumers, the wider economy, and yes, at the margin, for us.”
Additionally, industry analysts and financial services reporters agree that, given his administration’s dismantling of the CFPB, which holds significant legal authority to govern the consumer credit card marketplace, President Trump would have trouble implementing the policy. “If the president can somehow muscle through the credit card interest rate cap he demanded,” said Bloomberg’s Evan Weinberger, the CFPB “would be the lead agency to implement it.” The problem with that plan? Under the Dodd-Frank Act, “Congress explicitly barred the CFPB from setting a ‘usury limit,” Weinberger noted. (A usury limit is a maximum interest rate a lender can legally charge.) Brian Gardner, Stifel Financial Corp.’s chief Washington policy strategist, told Weinberger, “The logistics are totally impractical.”
When it comes to litigation, the banking sector appears to be on firm legal ground. But it’s worth pointing out that the Trump administration’s U.S. Department of Justice is no stranger to defending the president’s executive orders in court. At least two dozen of President Trump’s executive orders have totally or partially blocked by federal courts.
While the Trump administration has heavily relied on executive orders to enact its policy agenda, the legal standing of an executive action on this score is questionable at best. Some pundits have argued that the administration could pressure the financial regulators to begin applying Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) enforcement to credit card companies that assess interest in excess of 10 percent annually after next week; however, the hollowed-out CFPB would have the most obvious ability to bring such enforcement actions, and its ability to do so is questionable at best.
One final note: there’s an odd irony to President Trump’s proposal. As Bloomberg has noted, President Joe Biden tried to cap credit-card late fees at $8 through a CFPB rulemaking, but the Trump administration scrapped that proposal last spring in the face of industry opposition.
Expect the banking industry to remind Trump administration officials, and Republicans on Capitol Hill, of this point.
Will This Cap Be Implemented?
An executive order is not the president’s only option, of course.
In February 2025, strange political bedfellows, Sen. Josh Hawley (R-Mo.) and Sen. Bernie Sanders (I-Vt.), introduced legislation, S. 381, that would cap credit card interest rates at 10 percent for five years. That bill has not gained much traction, however. It has only attracted two cosponsors, Sen. Jeff Merkley (D-Ore.) and Sen. Kristen Gillibrand (D-N.Y.), and it does not appear that Senate Banking, Housing, and Urban Affairs Chair Tim Scott (R-S.C.) has any plans to advance it through his committee. An identical bill introduced in the U.S. House, H.R. 1944, has only two lawmakers signed on.
Republican congressional leaders also have not embraced the idea of a 10 percent credit card interest rate cap. According to Politico:
- Senate Majority Leader John Thune (R-S.D.) said, “That’s not something I’m out there advocating for — let’s put it that way.”
- Senate Banking Committee member Thom Tillis (R-N.C.) said he is “totally against” the cap.
- A Republican member of the House Financial Services Committee, granted anonymity to speak freely, called the rate cap “horrible policy.”
But a rate cap is not the only legislative option on the table.
Yesterday, Sen. Robert Marshall (R. Kan.) and Sen. Richard Durbin (D-Ill.) reintroduced their Credit Card Competition Act, which, according to Sen. Marshall, “would increase competition in the credit card processing market by requiring large banks with more than $100 billion in assets to enable at least two unaffiliated card networks (including one outside Visa/Mastercard), helping lower swipe fees for small businesses and passing savings on to consumers.”
While this bill does not call for capping interest rates, it would significantly reduce a large revenue stream for credit card companies, and, of course, an interest rate cap could be added to the bill as an amendment if it begins to move through Congress. President Trump immediately endorsed the Credit Card Competition Act, but credit card companies also oppose this legislation.
With strong industry and GOP leadership opposition to a credit card interest rate cap — and constitutional and legal questions about an executive order or regulatory fiat as a pathway to execution— it’s not likely that this policy will go very far. Indeed, yesterday, House Speaker Mike Johnson told Politico, “I wouldn’t get too spun up about ideas that are out of the box, that are proposed or suggested.”
But actual implementation of this policy may not be the point.
With the president’s approval ratings on the economy declining, a rate cap is an obviously populist political issue for the White House. We may never see it written into law, but we may hear a lot about it on the campaign trail — and on the president’s social media account.