Credit card fees in the US are quite high. Many politicians have been talking about introducing measures designed to lower them and the 2020 presidential candidates have not been left behind. Bernie Sanders is teaming up with rising superstar in the party Alexandria Ocasio-Cortez to create a new plan that would effectively help cut credit card fees. It’s not only Sanders that has raised concerns over credit card fees. Other candidates in the Democratic lineup including Senator Elizabeth Warren have also lamented over the high fees. In fact, Warren is supporting another plan that will cap credit card interest rates in the future.
The proposal by Sanders and Cortez is planning to set a nationwide 15% percent cap on the interest rates that consumers can be charged in a credit card. Sanders and Cortez believe that the current rates are unreasonable arguing that in some cases they have gone as high as 30%. They called this “extortion and loan sharking.” The proposal would also open the door for the US Postal Service to offer consumers banking services including savings and checking accounts. The move would effectively put the postal service in direct competition with the banks.
There are also other candidates who are pushing for measures to lower credit card fees. Elizabeth Warren, the United States Senator from Massachusetts, whose platform in 2020 is largely looking to protect consumers from Wall Street abuses, is one of the notable names in this. Warren is sponsoring a bill that was introduced by Senator Sheldon Whitehouse from Rhode Island. This bill would mandate credit card companies to abide by interest rates caps and restrictions. Warren has also called on the US Postal Service to expand its financial offerings too.
But Senator Kirsten Gillibrand from New York has actually come up with a proposal called the “Postal Banking Bill.” The bill is designed to expand financial services offered by the US Postal Service. The details are still not yet clear but they will likely come out very soon. The Sanders and Cortez proposal will however not sail through that easy. First, the banking industry will fight it with all the power they got. Introducing interest caps is definitely not good for their business and the fact that the US Postal Service could be a direct competitor will not amuse players in this industry.
The Consumer Bankers Association has already opposed the plan arguing that a “one size fits all” cap will eventually make other loans including mortgages and student loans inaccessible to Americans around the country. The American Bankers Association has weighed in arguing that such a move would cripple competition in the banking industry. The association believes that little government interference in the banking industry has led to innovations that have made loans less costly and accessible to people of all income levels.
It’s also very likely that GOP lawmakers will reject the bill. Republicans have always been pro market calling on little government interference into the economy. Even though there might be some agreement that indeed credit card fees need to drop, the way Cortez and Sanders plan to do it will not be acceptable to the GOP.