WASHINGTON — Credit card interest rates have skyrocketed over the past few years, increasing borrowing and debt. Congress has attempted to mitigate credit card debt for Americans by introducing legislation to cap credit card interest rates at ten percent. However, this legislation would do more harm than good.
To inform the debate around new legislation proposing a 10% interest rate cap, the Progressive Policy Institute (PPI) today released “Cutting Credit: How Rate Caps Undermine Access for Working Americans.” Authored by Andrew Fung, Senior Economic & Technology Policy Analyst; Alex Kilander, Policy Analyst at PPI’s Center for Funding America’s Future; and Sophia Lu, PPI Public Policy Fellow, the report argues that while rising interest rates reflect inflation and increased lending risk, a blunt rate cap would strip issuers of a key tool for managing that risk — ultimately reducing access to credit for working-class borrowers.
“A 10% interest rate cap may sound like relief, but it could end up closing the door on credit for millions of Americans,” said Fung. “When lenders can’t price for risk, they stop serving lower-income borrowers.”
The authors suggest three ways that would strengthen consumer protections without cutting off access to credit:
“Rather than imposing blanket rate caps, targeted reforms expand access to responsible credit and empower consumers through transparency and education, said Kilander.”
Read and download the report here.
Founded in 1989, PPI is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org. Find an expert at PPI and follow us on X.
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Media Contact: Ian O’Keefe – iokeefe@ppionline.org
