| | | | |  | | By Katy O'Donnell | | Presented by |  | | | Editor’s note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro.
| | Donald Trump surprised the financial services industry when he floated “a temporary cap” on credit card interest rates during a campaign speech, pledging a limit of “around 10 percent.” The proposal comes as Americans’ credit card debt reached a record $1.14 trillion in the second quarter, with 9.1 percent of balances moving into delinquency over the last year, according to the New York Fed. Of course, Trump would not be able to cap interest rates without Congress. But at least one lobbyist fretted to MM that the former president’s stamp of approval last week could breathe new life into the idea on the Hill, where rate caps already have the support of many Democrats. “We still see this as a low-probability event as it would require an act of Congress,” Jaret Seiberg, managing director at TD Cowen’s Washington Research Group, wrote in a client note. “That said, this provides an opening for Democrats next year to seek an interest rate cap of between 24 percent and 36 percent.” A bill to extend to all consumers the protections of the Military Lending Act — which limits the effective rate on consumer loans to servicemembers to 36 percent — has 18 Democratic cosponsors in the Senate. The average annual percentage rate charged on credit card accounts was 22.8 percent as of May 2024, according to Federal Reserve data, up from 12.9 percent in late 2013. Major credit card companies charged over $105 billion in interest in 2022, according to a CFPB report. “It seems likely to us that Democrats will revive their legislative push for a usury cap in 2025,” Seiberg wrote. “They will likely cite Trump's support as a reason for Republicans to get on board regardless of which candidate wins the White House in November.” They can already count on the support of at least one Republican: Sen. Josh Hawley (R.-Mo.) last year introduced a bill to cap credit card interest rates at 18 percent. And a different push to crack down on credit card issuers picked up the support of GOP Sens. JD Vance and Roger Marshall, who joined Hawley in cosponsoring Sen. Dick Durbin’s Credit Card Competition Act, which would require banks to give merchants a choice of two different networks to process a credit card transaction. Still, any law limiting credit card interest rates would almost surely face a legal challenge. A CFPB rule capping credit card late fees is tied up in litigation brought by the Chamber of Commerce and banking trade groups. The proposal could open up a new fight with banks, as our Michael Stratford reported Thursday. Lobbyists argue that capping the interest rates and late fees banks can charge would lead to reduced credit availability since card issuers won’t have the financial incentives to extend credit to riskier borrowers. “A government mandate to cap credit card interest rates punishes Americans by limiting credit card options and reducing access to affordable credit,” said Bill Hulse, senior vice president of the Chamber of Commerce Center for Capital Markets Competitiveness. A study of the effects of a 2021 Illinois law capping interest rates at 36 percent found that the law decreased the number of loans to subprime borrowers by 38 percent while increasing the number to prime borrowers by 16 percent. “Responses to a survey of small-dollar-credit borrowers in Illinois who lost credit access suggest the interest-rate cap worsened the financial well-being of many of these borrowers,” the authors wrote. Consumer groups, meanwhile, offered tepid support for the Trump proposal. “The National Consumer Law Center and other consumer groups have long pushed for a national interest rate cap, but it needs to be permanent and cover all forms of credit, including 400 percent APR payday loans and including all junk fees,” NCLC Associate Director Lauren Saunders said. “We’ve supported a 36 percent rate cap that includes all fees and lower rates for larger loans.” Time will tell how hard, if at all, Trump pushes the proposal. But putting his imprimatur on it could give more populist-leaning Republicans cover to extend their support. IT’S MONDAY — Send thoughts on credit card interest rates to kodonnell@politico.com And, as always, feel free to reach out to Sam at ssutton@politico.com.
| | | | A message from Synchrony: Your refrigerator is on the brink. Your child needs braces. Your car could use new tires. Credit plays an important role in our everyday lives. Access to credit is critical for Americans to get the things that matter, while helping build healthy credit history necessary for reaching long-term financial goals. Learn more about how access to credit can transform lives. | | | | | Monday … The Brookings Institution holds a discussion on housing affordability at 2:30…the World Bank holds a news conference at 6 p.m., to announce Denmark's early financial commitment to the International Development Association Tuesday … The Council on Foreign Relations holds a discussion on U.S. international economic policy at 9 a.m….SEC Chair Gary Gensler appears before the House Financial Services Committee for an oversight hearing at 10 a.m. … Wednesday … The House Financial Services Financial Institutions and Monetary Policy Subcommittee holds a hearing on Basel 3 Endgame at 10 a.m. …Gensler appears before the Senate Banking Committee for an oversight hearing at 10 a.m. … The Senate Budget Committee holds a hearing on housing unaffordability at 10 a.m. … Thursday … The Peterson Institute for International Economics holds a virtual discussion on "The Economic Effects of Trump's Plans for Tariffs, Deportations, and the Fed” at 9 a.m ... .U.S. Ambassador to China Nicholas Burns, Daleep Singh, deputy national security adviser for international economics, and Elizabeth Kelly, director of the Commerce Department's NIST U.S. Artificial Intelligence Safety Institute, speak at the Atlantic Council GeoEconomics Center’s Transatlantic Forum on GeoEconomics, beginning at 9 a.m…Federal Reserve Chair Jay Powell, Fed Vice Chair for Supervision, Michael Barr, Treasury Secretary Janet Yellen and Gensler speak at a New York Fed conference, beginning at 9:20 a.m. Friday … Brookings holds its virtual Brookings Papers on Economic Activity conference, beginning at 8:30 a.m.
| | CBS poll: Americans’ economic outlook improving, helping Harris — “With interest rates and gas prices coming down, the number of voters saying the economy is good has ticked up,” CBS reports. “That, along with a debate voters say was net positive for her, has helped Harris a bit. The vice president has now moved to the slightest of edges across the battleground states (it was 50-50 last month), and she is now up 4 points nationally over Donald Trump.” “...The challenge that remains for her, though, is that despite the improvement, many voters still don't think things are good. And the ones that don't are voting for Trump. But in all, Harris has narrowed her deficit with Trump among those who call the economy a major factor.” WSJ: Harris makes undercover push to win over Corporate America — “Like past Democratic candidates, Harris has made taking on wrongdoing by American corporations a central part of her pitch to voters, referring on the campaign trail to her record of taking on big business, blaming food manufacturers for high grocery prices and promising to increase taxes on corporations and the wealthy,” WSJ’s Tarini Parti, Emily Glazer and Maggie Severns report. “But, in private at least, she is making a quiet play for Corporate America’s support, seeking out advice from leaders across sectors. She has offered few policy specifics, but many executives say they view her openness to their feedback as enough for now.” NYT: How Trump could upend taxation in America — “Trump has floated ideas that, taken together, would fundamentally change the way Americans are taxed, eroding the income tax while embracing expansive tariffs as a way to raise federal revenue,” NYT’s Andrew Duehren writes. Reuters: Harris to release new economic proposals on wealth creation — “Vice President Kamala Harris plans to roll out a new set of economic policies this week that aim to help Americans build wealth and set economic incentives for businesses to aid that goal, three sources with knowledge of the matter said,” Reuters’ Nandita Bose reports. “The new policies, which have not been previously reported and could be announced in Pittsburgh on Wednesday, come as undecided voters continue to ask for more information about how Harris would help them economically if she were elected president in November, including those in critical swing states, the sources said. Harris pledges to ‘encourage’ crypto, AI — “Kamala Harris told donors Sunday she plans to ‘encourage innovative technologies like AI and digital assets,’ marking her first public comments about cryptocurrency as a presidential candidate,” our Jasper Goodman reports. “The vice president's remarks, delivered at a New York fundraiser, are the most significant signal yet that Harris may usher in a friendlier approach to the crypto industry than the Biden administration. The comments follow weeks of tug-of-war between pro-crypto Democrats and skeptics in the party who say digital assets pose risks to consumers.”
| | Congress nears deal to avert shutdown — “Congressional leaders are closing in on a deal to avoid a potential government shutdown on Oct. 1, even as Speaker Mike Johnson holds off on publicly blessing the plan,” our Jordain Carney and Nicholas Wu report. “The forthcoming bill, known as a continuing resolution, is expected to fund the government until mid-December and will not include Republicans’ proposal to require proof of citizenship in order to register to vote. Though talks are continuing, negotiators are hoping to have text finalized this weekend and plan to hold a House vote early next week — a timeline first reported by POLITICO.” China investment screening legislation set to be attached to must-pass defense bill — “Congress’ annual defense policy bill appears poised to become the site of the next Capitol Hill clash over regulating investments in China,” Jasper reports. “Legislation that would require Wall Street firms to disclose some investments in critical Chinese sectors is included in a package of bipartisan amendments expected to be attached to the Senate’s annual National Defense Authorization Act. It is one of 93 amendments set to be attached to the Senate defense bill, which will need to be negotiated with the House before becoming law.” Gottheimer presses CFPB on domestic violence — Rep. Josh Gottheimer is leading a bipartisan letter to the CFPB urging the agency to work with Congress to propose a rule on disputes related to domestic violence and coerced debt.
| | | | A message from Synchrony:   | | | | | SEC plans to seek sanctions against Musk for skipping testimony — “The Securities and Exchange Commission plans to seek sanctions against Elon Musk after he missed previously scheduled testimony for the regulator’s investigation into his $44 billion purchase of Twitter, according to a court filing,” our Declan Harty reports. CFTC green-lights guidance for listing voluntary carbon credit derivatives — “Wall Street's top derivatives regulator has approved new guidelines for financial exchanges in a bid to shore up the integrity of voluntary carbon markets, the agency said Friday, a potentially legacy-defining move for CFTC Chair Rostin Behnam,” Declan writes.
| | | Reuters: US to propose ban on Chinese software, hardware in connected vehicles — “The U.S. Commerce Department is expected on Monday to propose prohibiting Chinese software and hardware in connected and autonomous vehicles on American roads due to national security concerns,” Reuters’ David Shepardson reports. “The Biden administration has raised serious concerns about the collection of data by Chinese companies on U.S. drivers and infrastructure as well as the potential foreign manipulation of vehicles connected to the internet and navigation systems.” FOOD FIGHT — Leading proponents of the backlash against corporate policies tied to environmental, social and governance principles are warning major food retailers about potential legal liabilities related to their climate commitments. Will Hild, who leads the conservative anti-ESG nonprofit Consumers’ Research, is sending letters today to the CEOs of Target, Tyson and Ahold Delhaize, alerting the companies that they could face litigation risks similar to charges that New York Attorney General Letitia James brought against leading beef producer JBS earlier this year. Hild argues that New York's claims that JBS has falsely advertised its net-zero plan without any concrete plans to achieve the goal could credibly be made against the three food retailers. “Costly litigation harms the consumer,” Hild wrote in the letters viewed first by POLITICO. “And that is doubly so when one outcome of the litigation is the removal of food products from store shelves in order to meet climate commitments that should never have been made in the first place.”
| | | | A message from Synchrony: Your refrigerator is on the brink. Your child needs braces. Your car could use new tires. Credit plays an important role in our everyday lives. Access to credit is critical for Americans to get the things that matter, while helping build healthy credit history necessary for reaching long-term financial goals. Research shows that nearly 50 million Americans do not have access to credit. By looking at data beyond credit scores, Synchrony can make smart decisions about how much credit to extend and to whom. Responsible access to credit helps Americans build a pathway to financial mobility. Learn more about the importance of providing access to credit. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |
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