New Delhi, Jan 13 Shares of major US card issuers and banks, including American Express, have tumbled after President Donald Trump called for a cap on credit‑card interest rates at 10 per cent for a year.
American Express fell about 4.28 per cent to $359 and Capital One plunged 6.4 per cent, its largest drop in nine months. American Express Co shares are down 5.33 per cent in the past five days.
Citigroup declined 3 per cent, Wells Fargo eased 1 per cent and Synchrony Financial plunged 8.4 per cent.
Analysts warned that the cap could wipe out billions in industry profits and curb lending. Payments firms Visa and Mastercard, though they don't issue credit cards, felt the impact, as they relied on fees generated when consumers use their products.
President Trump has set a January 20 deadline for companies to comply or face being “in violation of the law,” and warned of “very severe things” for firms that do not lower rates to 10 per cent.
“I want a cap on credit card interest rates because some of them are 28 — almost 30 per cent. People don't know they're paying 30 per cent (credit card interest rates),” Trump said.
“The people out there are working, and they have no idea that they're paying 30 per cent. We are putting a one-year cap at 10 per cent and they know it. They (credit card companies) have really abused the public. I am not going to let it happen,” the US President said last week.
Though industry groups including the Bank Policy Institute and the Consumer Bankers Association endorsed the goal of more affordable credit, they warned a 10 per cent cap would impact credit availability and harm consumers and small businesses that rely on cards, according to multiple reports.
Analysts noted that implementing the cap would require new legislation from Congress, and is unlikely given the strength of the banking industry’s lobbying power in Congress.
Trump's announcement comes at a time as the US heads for its midterm election, following his comments to Republican aides of possible impeachment, if the midterm polls in November are lost.
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