AOC teams up with Florida Republican Rep. Anna Paulina Luna for bill capping credit card interest at 10%

Unexpected Allies in the Fight Against High Credit Card Interest Rates

In an unexpected turn of events, two millennial congresswomen from opposing political sides have joined forces to tackle a issue that resonates with millions of Americans: soaring credit card interest rates. Representatives Anna Paulina Luna (R-Fla.), 35, and Alexandria Ocasio-Cortez (D-N.Y.), 35, introduced legislation on Friday aimed at capping credit card interest rates at 10%. This move isn’t just notable because of their ideological differences—it also highlights the growing frustration among lawmakers and consumers alike about the burden of high-interest debt.

The proposed legislation comes at a time when credit card interest rates have reached historic highs. According to recent data from Forbes, the average credit card interest rate stands at 28.71%, nearly three times the cap that Luna and Ocasio-Cortez are proposing. These rates have skyrocketed since the COVID-19 pandemic, which triggered inflation and economic uncertainty. The Federal Reserve’s dataset, which dates back to 1994, shows that credit card interest rates have never dipped below 10%. The closest they came was during the 2008 financial crisis, when rates fell to around 11.88%. This historical context underscores just how extreme the current rates are—and why many argue that intervention is needed.

The Push for a 10% Cap: A Bipartisan Effort

The idea of capping credit card interest rates at 10% isn’t entirely new. President Donald Trump floated the idea during his 2024 campaign, pledging to protect working-class Americans from what he called "absurd" interest rates. Now, Luna and Ocasio-Cortez are taking that concept to Congress. In a statement, Luna emphasized the need for fairness, arguing that credit card companies have long exploited working-class Americans with exorbitant rates, trapping them in a cycle of debt. "We need a fair solution—and that means getting rid of the status quo and putting a reasonable cap on interest rates," she said.

Ocasio-Cortez, who has long been an advocate for financial reform, echoed Luna’s sentiments. "Credit cards with high interest rates regularly trap working people in endless cycles of debt," she argued. "At a time when families are struggling to make ends meet, we cannot allow big banks to shake down our communities for profit." The two lawmakers are building on earlier efforts, including a 2019 bill introduced by Ocasio-Cortez that sought to cap interest rates at 15%. Meanwhile, Sens. Bernie Sanders (I-Vt.) and Josh Hawley (R-Mo.) introduced a similar cap legislation last month, signaling growing bipartisan momentum behind the issue.

Critics Sound the Alarm: Economic Consequences of Rate Caps

While the proposal has garnered support from some lawmakers and consumer advocates, it has also faced fierce criticism from economists and banking groups. Critics argue that artificially capping credit card interest rates could have unintended and far-reaching consequences for the economy. In a letter to Sanders and Hawley, the American Bankers Association and 52 state banking groups warned that such a cap would restrict access to credit for millions of Americans who rely on credit cards as a financial safety net. They pointed to examples in states like Oregon and countries like Chile, where similar policies have led to reduced access to credit.

Economic experts have also weighed in, cautioning that interest rate caps could harm the very people they aim to protect. Arpit Gupta, an associate professor of finance at New York University, noted that while capping rates might help some low-income borrowers avoid debt traps, it could also lead to "credit rationing," where lenders are less willing to approve loans for high-risk borrowers. C. Kirabo Jackson, an economist at Northwestern University, agreed, stating that while a higher cap—such as 30%—might be beneficial, a 10% cap is too low and could backfire. "This is not just a hot take," Jackson said. "Research indicates this."

The Broader Implications of the Proposal

One of the most striking aspects of the proposed legislation is the gap between the 10% cap and the current benchmark interest rates set by the Federal Reserve. The Fed’s benchmark rate, which determines the rate at which commercial banks borrow and lend reserves, falls between 4.25% and 4.50%. This is dramatically lower than the interest rates credit card companies charge consumers, which often exceed 20% or even 30%. Luna and Ocasio-Cortez have pointed to this disparity as evidence that credit card companies are profiteering at the expense of consumers. However,ponents argue that credit card interest rates are determined by market forces and reflect the risks associated with unsecured lending.

The proposal also raises questions about the role of government intervention in the financial markets. Supporters argue that capping interest rates is a necessary step to protect vulnerable consumers from predatory practices. Critics, on the other hand, believe that such intervention could disrupt the delicate balance of the financial system and reduce access to credit for those who need it most. As the debate continues, one thing is clear: the issue of credit card interest rates has become a lightning rod for broader concerns about economic inequality and financial regulation.

The Path Forward: Will the Legislation Gain Traction?

Despite the momentum behind the proposal, it remains unclear whether the legislation will gain traction in Congress. The bill faces significant opposition from powerful lobbying groups, including the banking industry, which has already begun to mobilize against it. Additionally, there are questions about whether President Trump, who originally floated the idea of a 10% cap during his campaign, will continue to support it now that he is back in the White House.

Given the political divide in Washington, the legislation’s chances of passing are uncertain. However, the fact that lawmakers from both parties are engaging with the issue suggests that there is a growing recognition of the need for reform. Whether through this specific proposal or future legislation, the debate over credit card interest rates is likely to remain a key issue in the coming months and years. For now, the unlikely alliance between Luna and Ocasio-Cortez serves as a reminder that even in a deeply divided political climate, there are still areas where lawmakers can find common ground—even if it’s just for a moment.