Bank Execs Say Trump’s Credit-Card Interest Rate Idea Is Bad for Consumers—and Business

Banks are knocking President Donald Trump’s bid to cap credit card rates.

Lenders this week panned a potential 10% limit on credit card interest rates during conference calls at which executives discussed their latest financial results. Bank leaders were vocal about a cap’s potential to cut consumers’ access to credit and curtail economic growth—though more circumspect about what it might mean for their business.

Profits in the credit card segment are four times the banking industry average, according to a Federal Reserve Bank of New York study. Lenders collect interest on the $1.23 trillion outstanding on U.S. credit cards, which carry an average annual interest rate of 21%.

Here’s what financial services executives have said:

• “Price controls” on credit cards would put pressure on consumers and JPMorgan & Chase (JPM), CFO Jeremy Barnum said Tuesday. “People will lose access to credit like on a very, very extensive and broad basis, especially the people who need it the most. And so, that’s a pretty severely negative consequence for consumers, and frankly, probably also a negative consequence for the economy,” Barnum said, per a transcript, later adding: “It should be obvious that that would also be bad for us.”
• “The impact to us and other banks would just be dwarfed by the severe impact on access to credit and on consumer spending,” Citigroup (C) CEO Jane Fraser said Wednesday, according to a transcript made available by AlphaSense, later saying: “A vast majority of consumers and businesses will lose access to credit cards. They’d be forced to pursue more predatory alternatives. And you’d only be left with the wealthy having access to credit cards and nobody wants that. We’d also see some of the domino effects through retail, travel, hospitality sectors, [and a] much broader impact on GDP.”
• Similar “unintended consequences” were highlighted by Bank of America (BAC) CEO Brian Moynihan on Wednesday. “Less people will get credit cards and the balance available to them on those credit cards will also be restricted,” he said, according to a transcript.
• Wells Fargo (WFC) CEO Charles Scharf said Wednesday that the bank shared the administration’s desire to make life more affordable for Americans, but “the right response to that is—is something that we do think should be carefully considered,” according to a transcript. 
• The proposal could benefit LendingTree (TREE), CEO Scott Peyree said Tuesday. “[Lenders] would stop issuing cards to anybody,” he said, according to a transcript. “That would drive a lot more consumers to personal loans, which is a pretty big business for us.”

Experts have also warned that a cap on rates could shake up the credit-card rewards and points space.

Shares of major financial service firms fell Monday after President Donald Trump suggested imposing a 10% ceiling on credit card interest rates as soon as Jan. 20. Some analysts believe the pressure means an opportunity to pick up those shares.