, 21 tweets, 7 min read Read on Twitter
The new bill by @BernieSanders and @AOC to cap credit card interest rates at 15% is one of the most ambitious financial regulation proposals in the last few years. Let’s talk about why it’s a good idea, and some of the common arguments against it and why they don’t hold water.
Average credit card debt has been steadily increasing since 2013. The burden of this debt is mostly on the working class and especially on those who are currently unemployed or underemployed.
How did this become the case? Basically starting in the 1950’s and really taking off in the 1970’s, consumer credit became way cheaper to provide and many factors developed that hedged against the risk of providing it (credit reporting, debt buying, forced arbitration, etc.).
Credit card companies took advantage of generally lax usury laws in the US and combined that with deceptive marketing schemes. One you’ve probably seen is “0% APR for the first six months,” which can go as high as a bank wants after that period (in some extreme cases 79% APR).
Credit cards also get snuck into the financing of other goods or services. A common example is dentistry - you go in thinking you signed for a payment plan to fill your cavity, but they signed you up for a credit card. It’s happened to millions of people: consumerfinance.gov/about-us/newsr…
While payday and auto title loans are the most commonly cited financial products that put people into a #debttrap, credit cards have their fair share of victims, especially due to payments on medical services in our dysfunctional for-profit healthcare system.
Returning to this graph, you can see the #debtrap with that tall bar at the beginning. The people least able to pay are the ones with the most debt, and a lot of it is due to subprime interest rates from 24-36% APR.
Visa alone made a $2+bn profit in Q4 of 2018 while defaults from credit card debt hit a seven year high. There are clear winners and losers in the modern credit card economy, and you probably know you’re losing. But maybe you’re like this bootlicker and think that’s for the best:
Okay maybe not that bad. Let’s go over some of the arguments against capping the rate that are a bit less self-effacing and blindly loyal to the free market.
This is a common argument that we also see a lot with payday loans. It rests on two flawed assumptions: (1) the credit card companies dictate access to credit, and (2) that current subprime borrowers are teetering on the edge of being rejected and this will push them over.
There is no reason why the government cannot provide credit to working class communities through public banks as well as subsidizing nonprofit institutions like credit unions. Follow @PublicBankNYC @publicbankla @DCPublicBanking @PublicBanksNow to learn more.
The second aspect is totally unfounded. Access to credit in this country is incredibly easy. For a frightening anecdotal example, I had a client and while we were settling her credit card debt with a retailer, she hesitantly asked “What do I do about this?” and...
...showed us an offer from the same retailer, for the same card, with the same terms, sent to her a few days before the court date.

The numbers back this up as well: between 15-20% experience one rejection in any given year but it’s not uncommon to get access after a rejection.
Access to credit isn’t yes/no, and the industry and its advocates treat it that way to obscure that the access they hold up as unequivocally “good” can be a #debttrap
Here’s two arguments in one: (1) high interest rates only hurt the financially irresponsible, and (2) rate caps will lead to more borrowing. I hope the contradiction here is apparent: somehow rate caps will lead to both more and less access to credit!
The more sophisticated forms of this argument go: “CC companies will respond by seeking to mitigate risk with credit limits. Having lower credit limits will lead people to apply for more cards to get back to their net credit limit.” I’ll acknowledge it’s possible - but is it bad?
Applying for new credit accounts can impact your credit score. But not nearly as much as a high balance or default, both risks due to high APR. Two CC with $300 limit each at 15% APR is unequivocally better than one CC with $600 limit at 20% APR.
As to financial responsibility, this is simply victim-blaming people for what actually causes them to turn to credit cards: stagnated wages offset by rising rents, exorbitant healthcare costs, the dismantling of the US social safety net and more generally public investment.
The credit card profligate, some welfare queen (with all the racism and sexism that trope carries) out living it up with a shopping spree without thinking of the consequences, is a myth perpetuated to hide the responsible actors: credit card companies and a negligent government.
Credit card companies spend over $300 million a year on advertising alone, most of it misleading and obscuring terms in order to make it essentially seem like free money (or with cash back, extra money!). Unfortunately our law does not punish improvident extension of credit.
Alright let’s summarize. Credit card debt is an increasing harm to working class people squeezed by increasing healthcare costs and rent. Capping interest rates decreases the risk of default and the debt burden. There’s no reason why access to credit should require the #debttrap.
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