President Donald Trump’s recent proposal to impose a cap on credit card interest rates at 10% has sparked significant criticism from economists and political figures. Announced as part of a series of populist measures, the plan seeks to alleviate financial burdens on consumers but raises concerns about potential repercussions in the lending market.
Peter Schiff, a well-known economist, sharply criticized the proposal, labeling it as “unconstitutional” and akin to “socialist price control.” In a post on X, Schiff drew a parallel between Trump’s initiative and Kamala Harris’s earlier proposals during her campaign, which Trump had previously denounced. Schiff cautioned that limiting interest rates could lead to a credit crunch, stating, “This will force lenders to cut credit limits and close accounts for higher-risk borrowers.”
Trump has called for the cap to be in place by January 20, 2026, marking the first anniversary of what he hopes will be his second term in office. This move is part of a broader strategy that includes a ban on institutional buyers purchasing single-family homes and a $200 billion initiative aimed at reducing mortgage rates for homeowners.
Concerns from Financial Experts
Prominent hedge fund manager and Trump ally Bill Ackman echoed Schiff’s concerns, describing the cap as a “mistake.” Ackman warned that if credit card companies are unable to generate adequate returns, they might be compelled to cancel millions of accounts. This could push some borrowers toward less reputable lending sources, often referred to as “loan sharks.”
Senator Elizabeth Warren (D-Mass.) also criticized the proposal, asserting that “begging credit card companies to play nice is a joke.” She argued that Trump’s focus on affordability is insincere, and pointedly criticized the administration’s attempts to shut down the Consumer Financial Protection Bureau, an agency created to protect borrowers from predatory practices.
Despite the uproar surrounding Trump’s announcement, the financial markets appeared largely unaffected. The iShares U.S. Financial Services ETF (NYSE:IYG), which tracks major U.S. credit card and financial services companies, saw a slight decline of 0.21% on Friday, closing at $94.32.
The ramifications of Trump’s proposed cap on credit card interest rates remain to be seen, but the mixed reactions from financial experts and lawmakers highlight the complexities involved in regulating consumer credit markets. As the debate continues, both supporters and detractors will be watching closely to gauge how this policy might shape the future of lending in the United States.
