Trump's credit card rate cap plan has unclear path, 'devastating' risks, bank insiders say

Core Viewpoint - President Donald Trump's proposal to impose a 10% cap on interest rates for American credit card companies has caused significant concern among bank executives and could lead to reduced credit availability for consumers and small businesses [2][4][7]. Group 1: Market Reaction - Shares of major banks such as Citigroup, JPMorgan Chase, Wells Fargo, and Bank of America fell between 1% and 4% in premarket trading following the announcement [3]. - Companies closely linked to the credit card industry, including Visa, Mastercard, and American Express, also experienced declines, with Capital One's shares dropping 7% [3]. Group 2: Industry Implications - The proposed interest rate cap could render large portions of the credit card industry unprofitable, particularly for customers with subprime credit profiles, leading banks to potentially withdraw access to credit for these consumers [5][6]. - The industry may also reduce rewards programs and other benefits associated with credit cards, which could result in consumers either spending less or turning to alternative forms of unsecured debt [5]. Group 3: Enforcement Challenges - There is uncertainty regarding how the interest rate cap would be enforced, as the most straightforward legislative approach is not feasible by the proposed start date of January 20 [8]. - Alternative enforcement methods through banking regulators, such as the Consumer Financial Protection Bureau, are complicated by the Trump administration's previous attempts to limit the agency's power [9]. - The timeline given for compliance appears to be a strategy to pressure banks into voluntary compliance rather than a clear legislative mandate [10].