Sen. Bernie Sanders (I-VT) and Rep. Alexandria Ocasio-Cortez (D-NY) unveiled a plan Thursday to cap credit card interest rates at 15 percent.
"Let's be clear what we're talking about: We're talking about economic brutality," the two said announcing the plan in a Facebook livestream. "We are talking about some of the most powerful people in the world, people who make millions and millions of dollars a year, and banks that make billions of dollars a year in profit. And they see a real profit center in going after desperate people...who cannot afford the basic necessities of life."
Ocasio-Cortez argued that charging 30 to 40 percent interest rates is tantamount to "extortion."
"To charge 30, 40 percent interest rates is no less than extortion,” she said, pointing to usury laws that prohibited excessive rates until 1978.
In a tweet teasing the announcement, AOC described the plan as "radical" but in a follow-up statement said it only "sounds radical today."
New policy proposal dropping tomorrow with a special Senate co-lead ??— Alexandria Ocasio-Cortez (@AOC) May 9, 2019
It’s radical, which I always love, and we’re keeping more coins in your pocket, which I also love.
“This is not about tinkering at the edges to change -- to make substantive improvements to people’s lives,” Ocasio-Cortez told Fox News. “We need to go back and really look at the core issues. And a 15 percent cap on interest rates ... it's one of those things that sounds radical today but we had these laws in half of the states in America up until the 1970s.”
Credit card companies collected $180 billion in revenue from interest and fees last year, according to a summary of the proposal released by Sanders' office. Banks can borrow at 2.5% interest rates from the Federal Reserve, but the average credit card interest rate currently for consumers is a record-breaking 17.71%, the lawmakers noted.
In 1978, the Supreme Court overturned state laws protecting against usury by ruling that states could set their own interest rate laws.
The bill would allow for the Federal Reserve to allow lenders to charge higher rates, if it determines that the national usury cap would threaten the safety and soundness of financial institutions. Interest rates could only be raised above 15% for a maximum of 18 months, according to the proposal.
The 15% ceiling proposed is the same interest rate cap that Congress imposed on credit unions almost 40 years ago. (USA Today)
The chance of this legislation going anywhere under President Trump is slim to none, Matt Schulz, the chief industry analyst for CompareCards, told USA Today.
"There are powerful people and groups that have billions of reasons to make sure it doesn't happen," Schulz said. "But if the winds of political change blow through Washington, D.C., next year, I’d expect that the fight will happen, simply because so many Americans want it to."