Banking giant JPMorgan Chase is warning Americans, saying many of them could lose access to credit under Trump’s new proposed interest rate cap.
In a recent earnings call, Jeremy Barnum, executive vice president and chief financial officer of JPMorgan Chase, said he believes Trump’s proposed plan would be disastrous for consumers and the economy as a whole.
“Assuming for the sake of argument that something in the general form of price control on credit card interest rates goes ahead, what would be the consequences of that…
The correct assumption about what the system’s response will be to the imposition of price controls is not to simply compress profit margins, which are already at their kind of competitively optimal level, and thereby pass the benefits on to consumers.
What will actually happen is that service delivery will change dramatically. Specifically, people are going to lose access to credit, on a very, very extensive and broad basis, especially the people who need it most, frankly.
And so that’s a pretty serious negative consequence for consumers and, frankly, probably a negative consequence for the economy as a whole at this point.”
Earlier this month, Trump announced that he wants to cap credit card interest rates at 10% for one year, which will cause the stock prices of major banks to fall.
Trump is working with an unlikely ally, Democrat Senator Elizabeth Warren, who discussed the issue in an interview with CNBC.
“Also, I just want to start with the big picture. Is there anyone out there who is defending a 36% interest rate on credit cards or a 28% interest rate on credit cards? Is there anyone out there who isn’t getting paid by the industry that issues those credit cards?…
They say, oh no, you can’t beat credit card interest rates. Whatever happens, it will be the end of the world. We will close credit cards. They just go on and on. And it’s basically the same song they sang about what would happen if the CFPB put a cap on overdraft fees. What would happen if the CFPB set a maximum on credit card fees?
You know, the credit card companies literally make billions of dollars. Last year they made $150 billion in profits from the credit cards that American families own. So we have to make some choices. Do the investors and the corporate executives keep that $150 billion, or does some of it go back to hardworking families who are just trying to pay off their mortgage, just trying to buy their groceries every month?”
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