CUNA, NAFCU, and the Defense Credit Union Council (DCUC) urged Senate leaders to oppose an amendment to the “minibus” appropriations bill that would cap credit card annual percentage rates at 18%. The organizations note it would make credit more expensive and less available.
The amendment is based off legislation introduced earlier this month by Sen. Josh Hawley, R-Mo. The minibus bill would fund the federal government past Sept. 30.
“This amendment would not only cap credit card interest rates but would also include all associated fees and penalties in an arbitrary formula. Such government intervention would decrease consumer choice and credit availability and drastically lower the number of credit unions that would have the resources and scale to continue offering credit cards,” the letter reads. “This would mean that numerous credit unions and other small financial institutions would have to eliminate their credit card portfolios and notify their members and customers that they will have to take their business elsewhere.
“Concerns about consumer financial debt are certainly warranted, but there is a better way to address this problem,” it adds.
Federally chartered credit unions are required by law to have credit card rates at or under 18%. Most state-chartered credit unions, even in states without usury caps, have rates lower than 18% on cards issued to members.
“Although the average credit union credit card interest rate is significantly below the statutory limit, the cap does potentially affect credit unions’ ability to compete with other credit card issuers,” the letter reads.
“As responsible and well-regulated financial institutions, we urge Congress to work with us to address excessive consumer debt,” it adds. “This is a goal that can be achieved without creating barriers in accessing safe and affordable credit products, pushing people with marred credit histories and those on the financial fringe to unscrupulous and unregulated lenders, and discouraging future innovation and new products.”
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