Advocacy in Action: Don’t Cap Our Heroes’ Credit: Why a 10% Rate Cap Hurts Military Families

For anyone struggling with credit card bills, the idea of capping interest rates at 10% might sound like a welcome relief, but as an advocate for America’s military families and the credit unions that serve them, I have to sound the alarm: such a one-size-fits-all cap would likely do far more harm than good. It could unintentionally cut off servicemembers and hardworking consumers from the very lifeline of credit they rely on in emergencies, all while failing to address the root causes of predatory lending. 

In my role as Chief Advocacy Officer of the Defense Credit Union Council (DCUC) – representing hundreds of not-for-profit credit unions that together serve over 40 million military-affiliated members – I’ve seen firsthand how essential access to fair credit is for our men and women in uniform. We all want to protect consumers from excessive interest, but this blunt approach isn’t the answer.
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Credit Unions Already Protect Members
Credit unions already operate under a congressionally mandated interest-rate cap that is far stricter than what applies to banks. For decades, federal credit unions have generally been limited to about 15% interest (currently 18% under a temporary allowance), reflecting a mission centered on people—not profits. Combined with our not-for-profit structure, this cap ensures credit unions prioritize affordability and member well-being.

In other words, credit unions already do what policymakers claim to want: limit excessive rates while expanding access to fair credit. Imposing an even lower nationwide cap—such as a 10% APR ceiling on credit cards—would backfire, harming the very consumers it aims to help.

Unintended Consequences of a 10% Cap
A rigid 10% cap would significantly reduce access to credit, especially for higher-risk borrowers. If credit unions are prohibited from pricing loans according to risk, many would be forced to tighten underwriting standards or discontinue certain products altogether.

As DCUC has warned Congress, such a cap would “hinder credit unions’ ability to serve their members,” particularly those with thin or emerging credit profiles.

The consequences would be immediate and severe:

• Reduced Access for Underserved Communities: Credit unions serving low-income and working-class populations would struggle to cover the costs and risks of lending under a 10% ceiling. Institutions would be pushed to lend only to the most creditworthy borrowers, shutting out those who most need small-dollar loans or starter credit cards. International evidence supports this concern: a World Bank review of interest-rate caps found they frequently lead to reduced credit supply, higher fees, and worse outcomes for higher-risk borrowers.
  
• Loss of Small-Dollar Loans and Credit Cards: Many credit unions offer small-dollar emergency loans and low-limit credit cards to help members manage unexpected expenses or build credit. Under a strict 10% cap, these products could become unsustainable. Servicing a $500 emergency loan still involves real costs, and a 10% ceiling may not cover them. Credit cards—currently averaging about 21% APR nationwide— would effectively disappear for millions of consumers. Analyses of Federal Reserve data suggest that as many as two-thirds of revolving credit card borrowers, roughly 14 million households, could see their access curtailed under a 10% cap.
  
• Disproportionate Harm to Young Servicemembers: Junior enlisted personnel often have limited credit histories. Under a rigid cap, credit unions on military bases may be unable to approve loans or credit cards for these young men and women. That does not eliminate the need for credit—it simply forces servicemembers to seek worse alternatives. Senator J.D. Vance, reflecting on his time as a young Marine, recounted nearly financing a car at a 21% rate until a mentor directed him to Navy Federal Credit Union, which offered a rate less than half that. That loan was possible because the credit union could price risk responsibly. Under a blanket 10% cap, many similar borrowers might be denied credit altogether.
  

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Pushing Borrowers Toward Predatory Lenders
Restricting responsible lenders does not eliminate demand for credit—it redirects it. If a military family cannot obtain a 12% loan from a credit union due to a legal cap, they may turn to payday lenders charging 300% APR or worse. History shows that when access to regulated credit is restricted, borrowers often migrate to less transparent, more dangerous options. Even Senator Vance has acknowledged resorting to payday lending when traditional options were unavailable, warning that without such outlets, borrowers may turn to loan sharks or illegal lenders.

A 10% cap risks pushing vulnerable consumers into precisely the predatory markets policymakers claim to oppose.

Undermining the Credit Union Service Model
Credit union lending supports far more than loans. Interest income funds financial counseling, fraud protection, deployment assistance, and hardship relief programs—services especially vital to military families. A severe rate cap would undermine the financial sustainability of these programs, particularly for defense credit unions serving mobile, frequently deployed populations.

Unlike for-profit lenders, credit unions cannot offset losses by raising investor capital or layering on excessive fees. Constraining lending revenue would weaken the entire cooperative model, reducing benefits for millions of members.

Better Ways to Protect Consumers
There are smarter alternatives to a blanket cap:

• Expand financial education and counseling.
  
• Support responsible lending innovations like credit-builder loans and payday alternative products.
  
• Crack down on truly predatory actors charging triple-digit rates or exploiting loopholes.
  

These approaches protect consumers without cutting off access to affordable, regulated credit.

Conclusion
A blanket 10% interest-rate cap, however well-intentioned, would restrict credit, harm military families, and push borrowers toward worse options. Credit unions stand ready to work with policymakers on solutions that genuinely strengthen financial security. Let’s protect consumers without punishing those who serve—or those who serve them.