Sanders, Ocasio-Cortez Propose 15% Cap on Credit Card Interest

JORMBO

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https://www.bloomberg.com/news/articles/2019-05-09/aoc-bernie-sanders-credit-card-interest

Democratic presidential candidate Bernie Sanders and Representative Alexandria Ocasio-Cortez accused banks of acting as “modern-day loan sharks” and called on Congress to enact a federal limit of 15% on credit card interest rates.
The two self-identified democratic-socialists are set to propose legislation on Thursday capping rates on credit card and other consumer loans and letting post offices offer low-cost basic financial services, such as loans and checking and savings accounts.
An outline of the plan released ahead of their formal announcement sharply criticized banks for charging on average more than 17% interest on credit card balances while they are able to borrow money at less than 2.5%.

With Republicans in control of the Senate, the proposal has little chance of becoming law any time soon.
Americans have more than $1 trillion in credit card debt. According to figures from CreditCards.comcited by Sanders and Ocasio-Cortez, the national average interest rate on credit cards is 17.73% and many people pay much higher interest. The interest rate limit they propose also would apply to payday loans.
 
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EHuntingon

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Good luck getting credit card companies to give credit to people with anything less than stellar credit.
That’s a good point. What would be the qualifications at that point? I guess it would solve the problem of people have high-interest credit cards, because most people just wouldn’t have credit cards. Mission accomplished?
 
Jun 26, 2018
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Good luck getting credit card companies to give credit to people with anything less than stellar credit.
Giving credit to people who can only afford to make their monthly minimum is literally how credit card companies make the most of their money. People who can mostly pay interest and not the principle.
 

DunDunDunpachi

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Really good idea. This will simply cause credit card companies to raise their minimum interest levels.

So, the irresponsible people won't be able to hurt themselves as badly, but those who use credit responsibly will have to pay higher fees. Socialism at work! Punish the responsible for the sake of the stupid.

By the way, this paves the way for partial student loan forgiveness, or other similar student-loan "protections". Good luck going to college when the bank can't finance your poor ass with a high enough interest rate to make it worthwhile to the bank.
 
Jun 26, 2018
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Can't impose regulations on social media companies but you can tell credit card companies what interest rates they can charge.
I would tend to think that revolving debt and high interest rates are something that affect the middle class a little bit more than social media regulations. These are the sort of policies that get people's attention. And as an advocate for the middle class, I think we are in dire need of it.
 

DunDunDunpachi

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Even with excellent credit, the average interest rate for a credit card is 14.14%. That's not much of a raise.
When you have excellent credit, you can get 0% APR for x number of months, though. I guess since the base rate of interest is so high maybe they'll start taking the perks (like % back, and miles, and so forth) to cover the cost.
 
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When you have excellent credit, you can get 0% APR for x number of months, though.
True. But after that initial period, the average rate is just over 14% for people with excellent credit. And it's over 20% for people with good credit. And as far as promotions, Capital One banked $1.4b in the first quarter alone. I'm not going to worry about their profits at this point of the game. The middle class needs some relief.
 
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cryptoadam

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We are getting cards with 25.99% and if you miss payments welcome to 29.99%

It would interesting to see how many people default on their CC's. I work close to collections company and let me tell you business is booming and they never run out of the need to hire more people.
 
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Just force them to offer cards to everyone, including subprime candidates. What could possibly go wrong?
They do offer subprime candidates credit cards. In fact, it was subprime cardholders who saw their credit card debt increase by 26% in 2017. When they eventually can't pay the bills and charge of their debts, which is on its way to 2008 levels, who do you think pays for that?
 

DunDunDunpachi

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True. But after that initial period, the average rate is just over 14% for people with excellent credit. And it's over 20% for people with good credit. And as far as promotions, Capital One banked $1.4b in the first quarter alone. I'm not going to worry about their profits at this point of the game. The middle class needs some relief.
Personally, I'd rather see banks continue to get stomped by credit unions, crypto, and alternative payment sites like PayPal and Stripe.

Any regulations added to banks will -- necessarily -- be leveraged in a way to prevent smaller institutions from entering the market.

Granting tax write-offs for debt that is x years old and above x% of your yearly income seems like a better way for Gov't to get involved if the point is relieving the middle class. The Feds also offer various means of debt-relief (if the loan was Federally backed).

Restricting the upper % of credit just seems like it will force banks to ferret their graft into some other facet of owning a credit card. I do not believe that an upper cap will magically heal America's debt problem. I also don't think it will prevent Americans from opening up new credits cards, either. 5 credit cards at ~25% APR isn't all that different from 10 credit cards capped at 15% APR.

And believe me, the banks will argue that caps "artificially reduce our market prospects", so there will likely be a loosening of the rules that govern how many cards a person can have, how much of their yearly pay they're allowed to put on credit, etc.

After all, with caps in place, people are less of a danger to themselves. What incentive would banks have to "keep people safe" by denying risky credit requests when the government told us this 15% cap will make everything better? (say the banks with a grin and feigned naivety).
 
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Personally, I'd rather see banks continue to get stomped by credit unions, crypto, and alternative payment sites like PayPal and Stripe.
Many of these get gobbled up by the big banks and end up with the same predatory practices. I don't think a cap will solve the problem either, but clearly it will give the people a bit of breathing room and a chance to touch the principle on their card.
 
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Musky_Cheese

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That's great advice. Unfortunately, life doesn't always go the way you planned it would and credit cards put people in a hole they can't get out of. Too many hard working people are in that situation.
Then the mistake is theirs. Don’t spend money you don’t have.

Adults are not children, they don’t have the same standards and levels of accountability.
 

DunDunDunpachi

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Many of these get gobbled up by the big banks and end up with the same predatory practices. I don't think a cap will solve the problem either, but clearly it will give the people a bit of breathing room and a chance to touch the principle on their card.
Yeah, there is certainly no perfect solution.

I wish money-management was a bigger part of our culture. I am "uneducated" (college dropout) and was raised in conservative circles (therefore I should be double-uneducated, amirite?) and yet my family and my peers were regularly taught the dangers of money. From a young age we were taught how to be generous with our money, how to be grateful for what we had instead of taking shortcuts to get what we wanted, how to set aside our money instead of spending it right away, how to be thrifty, etc.

Credit cards were never a huge part of my life nor my parents' lives. To be honest, my child-brain always framed credit as something that either very wealthy or very foolish people used.
 

#Phonepunk#

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just one more reason why Sanders rules.

Biden was part of the whole credit card shit that went down during the bank crisis. credit card companies are entirely too powerful. when Obamacare was announced, I spent an hour on the site, was unable to sign up, and was directed to a credit company, who started asking me if i had a car or any loans or debt in my name.

it's a huge racket and politicians like Biden help them get away w all kinds of stuff. 15% is an absurd number as is, this is barely chipping away at a monster.
 
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it's a huge racket and politicians like Biden help them get away w all kinds of stuff. 15% is an absurd number as is, this is barely chipping away at a monster.
Bingo.

In total, Biden received $1,126,375 from those in the securities and investment industry, $304,475 from finance and credit company workers, and $295,900 from commercial bank employees.

Biden’s ties to MBNA and banks span beyond political contributions from its employees. Home sales, family jobs, and free trips caused critics to dub him “the senator from MBNA.”


 

appaws

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Interesting. I can see that this would have some unintended consequences, sort of like minimum wage laws pricing unskilled workers out of the job market. But these credit companies are rapacious and unsympathetic, so I don't think the public would shed any tears for them.
 
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HoodWinked

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Average APR is 17% so it's not going to make much difference for most.

But the credit cards with high apr exist for people with poor or no credit. So they can build their credit. If there is a cap it will just be more difficult to get approved or those credit cards will jack up the annual service fees to make up the loss.
 
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btgorman

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Look I agree that credit card companies are scum.

But how about, instead, we try to think of a way to force the credit card companies to lower their APR without regulation? Is there a possibility of a market-based solution? Why do credit card companies get away with 25% APR? Is it convenience? Can there be a public option?

For me it's convenience of not carrying cash. That's it. Oh and also, it helps my credit score. Maybe if we find a better/alternative path for people to improve their credit scores?
 

Miku Miku

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Sounds good to me. I don't see much of a downside.

I'm open to counter arguments though. I'm not exactly an expert on the CC industry. But this is an attempt to help people, and sounds good to me.

It's going to take one hell of a counterargument though to really convince me that CC companies have to keep interest rates that high for our own good.

Average APR is 17% so it's not going to make much difference for most.

But the credit cards with high apr exist for people with poor or no credit. So they can build their credit. If there is a cap it will just be more difficult to get approved or those credit cards will jack up the annual service fees to make up the loss.
People that just want to build credit can still get a secured CC, which is probably smarter for them anyway.
 
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Mihos

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Really good idea. This will simply cause credit card companies to raise their minimum interest levels.

So, the irresponsible people won't be able to hurt themselves as badly, but those who use credit responsibly will have to pay higher fees. Socialism at work! Punish the responsible for the sake of the stupid.

By the way, this paves the way for partial student loan forgiveness, or other similar student-loan "protections". Good luck going to college when the bank can't finance your poor ass with a high enough interest rate to make it worthwhile to the bank.
In reality, it just means the barrier of entry for credit cards will get worse. Most of the ones in that % rate bracket just won't get approved at 15%... so no cards for them.

It doesn't seem like something 'her base' would be OK with, though. Since she 'thinks' she is helping those with poor credit get better rates, but in actuality it means they just will never get approved for credit cards, and like you said, people like myself rates may go up. Which I am 100% OK with... but if I am agreeing with her, she probably didn't think this through.
 
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Miku Miku

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I am OK with it

It doesn't seem like something 'her base' would be OK with, though. Since she 'thinks' she is helping those with poor credit get better rates, but in actuality it means they just will never get approved for credit cards. Which I am OK with, also.... if I am agreeing with her, she probably didn't think this through.
Sanders is co-sponsoring it during an election campaign. It means his whole campaign vetted it also.

And yeah, preventing people from getting CCs if they can't truly afford it honestly is helping them.
 

infinitys_7th

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When you have excellent credit, you can get 0% APR for x number of months, though. I guess since the base rate of interest is so high maybe they'll start taking the perks (like % back, and miles, and so forth) to cover the cost.
Yep. This is actually how I paid for most of my last (5th) year of college - I got a credit card when I turned 18 and got several more after that to build credit history, and kept them paid off every month. Got an offer for 0% interest for 18 months with a $15k limit, so I maxed it out with the tuition. That was really the only debt I had, so paying it off was easy. I did end up transferring the last $5000 to another card on a no-fee-no-interest offer, but that was it.
 
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juliotendo

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I try to stick with cash and debit as much as possible to avoid all the nonsense with credit.
 

Musky_Cheese

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It's his own responsibility that he lets himself be supported by big banks. Why would they do that? Of course because they expect him to fight for their interests. Which usually runs counter to the average person's interests.
Yoshi you’ve always hated Biden. Don’t try to deny it.

Besides they are all bought by special interests
 

HoodWinked

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Sanders is co-sponsoring it during an election campaign. It means his whole campaign vetted it also.

And yeah, preventing people from getting CCs if they can't truly afford it honestly is helping them.
ya i guess you're right but man if sanders/cortez framed it this way would people go nuts. "you're denying them access to credit"
 
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StormCell

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Free money for them as well as they generally charge 5% on transactions. :)
And I would say that's a win-win for us and them, but then the stores usually just raise the price on us to pay them, so I guess it all evens out... except for those who aren't paying their cards off every month. Yeah, screw those people again and again! /s

Btw, @DunDunDunpachi , I'm pretty sure that most all the responsible people pay off their card(s) every month and probably never feel the wrath of the interest rates. Totally fine with them placing a cap on the interest rates.
 
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Yoshi

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Yoshi you’ve always hated Biden. Don’t try to deny it.

Besides they are all bought by special interests
I have never hated Biden and I do not now. I think he is a bad candidate, because he is a neoliberal and would not bring the required advancements to US social policies, but he would certainly lead to a much better foreign policy and better international cooperation when compared to Trump or even some democratic candidates. His coziness with big corporations and banks is a clear indicator though that he will not fight for serious improvements for the lower two thirds of US society. But, of course, if merely thinking another candidate is better than him constitutes as hate, then yes, I hate him. and have always hated him, because Gore and Obama were better candidates as well. Clinton was not though, so I probably hate her more (even though, if I were US American I would have voted for her)?
 
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Musky_Cheese

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I have never hated Biden and I do not now. I think he is a bad candidate, because he is a neoliberal and would not bring the required advancements to US social policies, but he would certainly lead to a much better foreign policy and better international cooperation when compared to Trump or even some democratic candidates. His coziness with big corporations and banks is a clear indicator though that he will not fight for serious improvements for the lower two thirds of US society. But, of course, if merely thinking another candidate is better than him constitutes as hate, then yes, I hate him. and have always hated him, because Gore and Obama were better candidates as well. Clinton was not though, so I probably hate her more (even though, if I were US American I would have voted for her)?
Yoshi, you need to learn to take a joke :messenger_heart:
 
Oct 2, 2017
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People, don't use credit cards if you can't afford it. If you can pay off the balance every month, credit cards are one of the best financial tools available. Paying interest on these cards is for dummies.
 

ssolitare

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There should be a cap, desperate people hitting 15% rather than 21% is a plus. The retail credit cards have ridiculous rates.

I just have my one card that I pay off every month, but I remember at 18 getting trapped into a credit storm because I was desperate.
 
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KINGMOKU

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Never understood why people make a big deal about free rewards with credit cards and points.

The credit card company is smarter than you, you’re paying for it just don’t realize it.
That depends on the card. Excellent for us, and have paid for several trips with those points, at zero cost to us. Zero cost.

This by the way, is a terrible idea. As others have stated, this will hurt those who credit isnt good enough to get a lower interest card. I remember when I got a card, with high interest that allowed me to start out. Without it, I have no idea how I would have gotten going.

All this is, is a way to limit services and is poorly thought out. This hurts people who have fair to poor credit history, and even some people with almost good credit. I'm also not sure how this would be enacted anyway.
 

DunDunDunpachi

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That's the point, maybe they should hand them out like candy.
Haha good point, but we can only bail out the banks so many times, man. At some point, we have to actually be responsible.

Folks are happy talking about ecological disaster, but what about financial disaster? The more we do this, the more we strain our financial system, and the more painful the next bubble pop becomes.
 

Eiknarf

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As usual...as expected... socialists are great at spending other people’s money (or in this case, telling Credit Card companies how much they can charge when taking a risk loaning folks money)