Not without some help

By Mark Huffman of ConsumerAffairs

• Trump cant cap credit card interest rates on his own: Under the Constitution, only Congress can regulate interest rates.

• High rates reflect riskbut defaults remain relatively low: Average credit card APRs exceed 20%, which banks say offsets the risk of unsecured lending.

• A rate cap could limit access to credit: Banks warn that a 10% cap would make lending to higher-risk borrowers unprofitable, likely leading to fewer approvals, lower credit limits, and account closures.

President Trump says credit card interest rates are too high and wants to cap them at 10%. But the president who has gotten things done with executive orders will have to go through Congress to achieve this goal.

The U.S. Constitution gives Congress the power to write laws regulating commerce and financial markets including interest-rate limits on credit cards. Trump has called for a one-year cap at 10%, but no such law currently exists, and a presidential proclamation alone doesnt change private-sector interest rates.

A bill has been introduced in both the House and Senate with bipartisan support to impose the cap, but neither has moved out of committee yet, meaning they havent been submitted for votes.

Banks have made it clear that they strongly oppose a cap, and even if such a bill is passed and signed into law, banks and industry groups could still challenge it in court, arguing limits on interest rates interfere with contracts and financial markets.

So, for there to be a cap on credit card interest rates, heres what has to happen:

1. Congress drafts, debates, and passes a law capping credit card interest rates.

2. The President signs that law.

3. The law withstands legal challenges in federal courts.

Until then, Trumps proposal is effectively a policy objective, not a binding rate cap.

Are rates really too high?

On the face of it, the answer seems obvious. However, banks point out that an average rate of north of 20% protects them from credit card users who default. There is no collateral to seize in case of non-payment.

But how common is credit card default? Federal Reserve data from the third quarter of 2025 show the credit card delinquency rate (30+ days past due) is around 3% of outstanding balances. Delinquency rates have risen from the unusually low pandemic levels, but are not extremely high historically.

The charge-off (default) rate deeper than standard delinquency is around 3.9% of credit card debt (Q3 2025) based on Federal Reserve figures, meaning lenders have recognized nearly 4% of balances as losses.

Personal loans are also unsecured but usually have lower interest rates than credit cards. The rate on a personal loan might be as low as 12%, not much higher than Trumps proposed cap.

Unintended consequences

Banks say a cap on credit card interest rates would result in reduced access to credit for higher-risk consumers. The banking industry warns:

• Many subprime and near-prime borrowers are only profitable to lenders at rates well above 10%.

• Banks would likely respond by:

  • Denying more applications

  • Lowering credit limits

  • Closing inactive or marginal accounts

This mirrors what happened after state-level usury caps and after the Military Lending Act capped rates for service members.

According to banks, credit becomes cheaper but harder to get. Consumers with good or excellent credit would benefit, especially if they carry a balance. Consumers with questionable credit might have trouble qualifying for a credit card.

Advocates say current rules are outdated and unrealistic

• The U.S. Department of Education will delay plans to seize tax refunds and garnish wages from struggling student loan borrowers

• Consumer advocates say current collection rules are outdated and risk pushing families and seniors into poverty

• The pause renews calls for reforms to reflect todays cost of living

The U.S. Department of Education has announcedthat it will delay plans to resume aggressive debt collection against student loan borrowers who have fallen behind on their payments, including seizing tax refunds and garnishing wages.

The move offers temporary relief to millions of borrowers still struggling with rising living costs after years of pandemic-era payment pauses and policy changes.

Todays announcement throws a lifeline to working and middle class families who are buckling under the weight of outdated student loan policies that dont reflect todays high cost of living and affordability crisis, said Abby Shafroth, managing director of advocacy at the National Consumer Law Center.

Advocates warn collection rules are decades out of date

Consumer advocates say the departments existing collection policies were set decades ago and have not kept pace with inflation or housing, food, and health care costs.

Under current rules, the Department of Education protects only the first $217.50 per week in wages from garnishment a threshold set in 2009. According to advocates, the buying power of that amount has fallen by more than 30% since then and now sits well below the federal poverty line.

Similarly, the department protects just $750 per month in Social Security benefits from seizure, a figure established in 1996. Today, that amount is less than 60% of the poverty line, putting older borrowers at particular risk.

Without changes, advocates warn that restarting collections largely paused since 2020 could push working families and retirees into poverty.

Calls grow for broader reforms before collections resume

Shafroth said the delay should be followed by structural changes to how the federal government collects student loan debt.

The Department of Educations current collection policies are outdated and can trap people already struggling to keep up with rising costs deeper in debt and even push them into poverty, she said. Thats the opposite of what our financial aid policies are supposed to do.

Consumer advocates are urging the administration to increase the amount of income protected for basic living expenses, shield anti-poverty benefits such as Social Security and the Earned Income Tax Credit from seizure, and cap collections at the amount borrowers are actually behind on payments.

They are also calling for simpler pathways for borrowers who fall behind to enroll in repayment plans or other options that help them manage their loans successfully.

For now, the departments decision delays the resumption of some of the governments most punitive collection tools but advocates say long-term relief will depend on whether those tools are reformed before they are turned back on.

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