For Immediate Release:
January 16, 2025
Contact:
Isabelle Dienstag | isabelle@sgstrategies.com | (224) 619-9001
Robert Mayo | hello@woodstockinst.org
Congress Should Cap All Interest Rates on Consumer Loans
**Media Interviews Available Upon Request**
CHICAGO – President Trump has said he wants to cap interest rates on credit cards at 10%, but as many experts have already pointed out, there would be severe unintended consequences from such a move, namely that credit card companies would issue fewer credit cards, significantly lower credit limits, or shift credit card balances into installment loans, all of which would drive consumers towards other, less desirable and even financially harmful options.
A 10% cap would likely push consumers towards vastly more expensive options in the alternative financial services market, like payday loans, which had a national average interest rate of 391% in 2025, or high-cost installment loans, which regularly come with triple-digit interest rates. The average credit card interest rate this month in the U.S. is 23.79%. If a 10% cap goes into effect, the Electronic Payments Coalition predicts over 80% of accounts could be cut off or have limits slashed. Without access to the credit we have today, consumer spending would plummet, constricting the economy.
“While we support genuine efforts to lower costs for American families, the reality of the President’s 10% rate cap proposal is that it would be a windfall for payday, auto title, and predatory installment lenders,” said Horacio Méndez, President and CEO of Woodstock Institute. “In contrast, in states like Illinois that have imposed a cap on interest rates for nearly all types of consumer loans, we’ve seen that it’s consumers who enjoy the windfall.”
Based on the Military Lending Act, the Illinois Predatory Loan Prevention Act (PLPA) became law in 2021, and triple-digit interest lenders like payday and car title lenders quickly closed up shop rather than figuring out how to make loans under the 36% rate cap. In 2022 alone, the PLPA saved consumers at least $600 million in loan interest and fees, and bankruptcies declined more in Illinois than in our neighboring states following the PLPA.
Counter to a discredited industry-funded report authored at Mississippi State University, multiple polls have shown that the 36% rate cap enjoys overwhelming bipartisan support and that consumers are finding other ways to manage a cash crunch, including credit options and options that don’t involve taking on debt. A 2024 poll found that 95% of former predatory loan borrowers support the Illinois rate cap, with 88% supporting an even lower cap.
Furthermore, the administration’s 10% cap is a stark reversal from their decision to ask the court to overturn the Biden administration’s rule capping credit card late fees, which was a strong affordability reform that would have benefited consumers. If the President really wants to help consumers and start to tackle the affordability crisis, he should work with Congress to limit junk fees and limit what predatory lenders can charge by passing a nationwide across-the-board consumer loan rate cap, or at least a margin-based cap that would fluctuate with inflation.
“Forty-five States and the District of Columbia have some form of consumer loan interest rate limit, so this would not be a novel strategy and would benefit consumers and the industry by creating a national framework versus the currently fragmented state-by-state framework,” said Méndez.
There are thoughtful–and battle-tested–ways to lessen the burden on consumers. A 10% cap on credit card interest rates isn’t one of them.
###
Woodstock Institute is a leading policy and research nonprofit that advocates for consumer financial protection and community economic development. Our work seeks to combat structural inequities and improve the quality of life in lower-income neighborhoods and communities of color. Among our areas of focus are predatory lending, access to banking, debt collection, and municipal fines and fees.
