The socialist duo in Congress, Sen. Bernie Sanders and Democratic Rep. Alexandria Ocasio-Cortez, are teaming up to introduce legislation that would cripple a multi-billion dollar industry.
On Thursday, Sanders and Ocasio-Cortez announced a plan to limit credit card interest rates at 15 percent, significantly lower than the current average rate, according to Yahoo Finance.
“Despite the fact that banks can borrow money today at less than 2.5% from the Federal Reserve, the average credit card interest rate today for consumers is a record-breaking 17.71%,” Sanders and Ocasio-Cortez said in a statement.
The bill would also allow states to establish interest rates that are even lower, according to The Washington Post.
“There is no reason a person should pay more than 15% interest in the United States,” Ocasio-Cortez said on Twitter. “It’s a debt trap for working people + it has to end.”
There is no reason a person should pay more than 15% interest in the United States.
It’s common sense – in fact, we had these Usury laws until the 70s.
It’s a debt trap for working people + it has to end.https://t.co/sO0p5NF7WR
— Rep. Alexandria Ocasio-Cortez (@RepAOC) May 9, 2019
But such legislation would cripple the United States finance industry, which brought in $113 billion in interest and fees from credit cards last year.
The socialists’ proposal would set interest rates far below the median interest rate, which was 21.36 percent last week, according to The Post.
Sanders and Ocasio-Cortez are right that banks borrow from the Federal Reserve at a significantly lower interest rate than consumers borrow from banks, but that’s because banks borrow millions of dollars and stimulate the economy.
Meanwhile, consumers are less reliable borrowers and use credit cards to make small purchases, which explains the disparity in interest rates. And the socialist lawmakers are actually hurting the consumers they are vowing to protect.
Consumers in unfortunate financial situations with bad credit would struggle to get approved for credit cards because lenders would be uncomfortable giving low interest rates to unreliable borrowers.
Riskier investments require higher interest rates. This is sheer financial illiteracy. https://t.co/G1Dps2hXvW
— Molly Prince (@mollyfprince) May 9, 2019
Of course, high interest rates aren’t good, but that doesn’t mean they need to be regulated down.
Credit cards aren’t necessary, and the people who accept high rates do so willingly. The process is a private, fair and consensual exchange between a lender and a borrower, and it ought to stay that way.
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