WASHINGTON--The Defense Credit Union Council issued a response to President Trump’s recent remarks at the World Economic Forum in Davos, calling for a one-year, 10% cap on credit card interest rates.
Jason Stverak, DCUC’s chief advocacy officer, voiced strong concerns that a blanket 10% rate ceiling would harm military families and working Americans by reducing access to responsible credit and producing serious unintended consequences. DCUC, he said, has a long history of opposing one-size-fits-all interest rate caps and is urging policymakers to consider smarter alternatives that protect consumers without jeopardizing financial access.
Credit Unions Already Cap Rates and Put People First
Credit unions are fundamentally different from for-profit credit card issuers. Federal credit unions have long been subject to a statutory interest rate cap, generally 15%, currently 18% under a temporary allowance, far below the 28–32% rates cited by the President, Stverak noted.
“Credit unions already operate under a statutory interest-rate cap that is significantly lower than what applies to banks and many other financial institutions,” Stverak noted, “and that cap has existed for decades, reflecting the credit union mission of putting people over profits, not maximizing shareholder returns”.
DCUC reminded that credit unions are already doing what policymakers say they want: keeping rates reasonable and prioritizing members’ financial well-being over profits. This not-for-profit, member-owned structure ensures credit unions strive to offer affordable credit to their member-owners as part of their core mission.
Unintended Consequences for Military Families and Access to Credit
DCUC said it continues to warn that imposing an across-the-board 10% APR cap, however well-intentioned, would likely backfire on the very consumers it aims to help.
A rigid cap would significantly reduce access to credit, especially for borrowers with less-than-pristine credit.
“A rigid federal cap would likely reduce access to credit by limiting credit unions’ ability to serve higher-risk borrowers,” Stverak explained. “Many credit unions would be forced to tighten underwriting standards or scale back credit card and small-dollar lending altogether. That outcome would disproportionately affect young servicemembers, junior enlisted personnel, and lower-income members who do not yet have prime credit profiles.”
Military families and younger servicemembers could be among the hardest hit. Credit unions often provide small-dollar emergency loans, credit-builder products, and starter credit cards to help junior enlisted members bridge financial gaps or build credit.
“Credit unions routinely provide small-dollar loans, emergency credit, deployment-related relief, and short-term financial assistance to servicemembers facing unexpected expenses,” said Anthony Hernandez, DCUC president/CEO, Ret, USAF Colonel. “These are precisely the kinds of responsible lending options that could become unsustainable under an arbitrary 10% cap. Many of these critical services could become unsustainable. Military families deserve policies that strengthen their financial security, not policies that unintentionally jeopardize it by limiting access to trusted, affordable credit.”
In practice, a 10% cap might mean fewer military members would qualify for any credit at all from reputable institutions. For example, many credit cards today charge around 18–24% APR based on risk; capping rates at 10% would force credit unions to approve cards only for the most creditworthy applicants and deny many young borrowers, leaving them with no safe borrowing options.
DCUC also expressed concern that artificially capping rates does nothing to eliminate the underlying need for credit; it merely drives borrowers to more dangerous alternatives.
“If responsible lenders like credit unions are forbidden from pricing loans according to risk (even at, say, 12% or 15% APR for a higher-risk member), those borrowers won’t simply stop needing credit. Instead, limiting the ability of mission-driven institutions to price loans according to risk does not eliminate the need for credit. It simply shifts borrowers toward less regulated, higher-cost alternatives outside the credit union system,” Stverak added. “In other words, capping interest rates in the mainstream market could push vulnerable consumers into the arms of predatory lenders.”
Military families or lower-income households denied a 12% credit union loan might end up at a payday lender or title loan shop charging 300% APR, or even an illicit loan shark, simply to cover an emergency expense. DCUC pointed out that this outcome is the opposite of what policymakers intend: instead of protecting consumers, a blunt 10% cap could expose them to far worse financial abuse outside the regulated credit union space.
Threat to Credit Union Services and Financial Readiness
Beyond the direct impact on loan access, DCUC highlighted that a sweeping interest rate cap threatens the broader service model that credit unions provide to military communities. Credit unions use the modest income from interest on loans to fund member services, everything from financial counseling and budget coaching to fraud protection, free account services, and relief programs for military families in hardship.
“Interest-rate cap proposals threaten the broader service model credit unions provide, including financial counseling, fraud protection, and tailored support for military families,” Stverak stated. “A one-size-fits-all cap could undermine the sustainability of these services.”
Credit unions often operate on or near bases, where they play a unique role in promoting financial readiness and stability for servicemembers, DCUC noted.
“If a 10% cap severely cuts into lending revenue, it chokes off the resources that fund these support programs. Unlike for-profit lenders, credit unions can’t simply charge new fees or raise capital from investors to make up the shortfall; their not-for-profit cooperative structure means any squeeze on lending directly translates into less funding for member benefits. The end result could be that credit unions are forced to ‘do less of what they do best' in serving military and veteran families, undermining financial education and readiness efforts across the board.”
DCUC Urges Targeted Solutions Instead of a Blanket Cap
Rather than accept the unintended consequences of a blunt 10% cap, DCUC said it is calling for a more nuanced, targeted approach to protect consumers from predatory practices without cutting off access to affordable credit.
“DCUC stands ready to work with Congress and the Administration to advance policies that protect consumers without penalizing the institutions that have consistently put people first,” says Hern. In this spirit, DCUC and other credit union advocates have urged lawmakers to consider alternatives such as:
• Expanding Financial Education and Counseling: Invest in financial literacy and counseling initiatives to help consumers make informed borrowing decisions, avoid debt traps, and improve their credit profiles – thereby naturally qualifying for lower rates over time. (Credit unions already lead by example here, often providing free financial education to their members.)
• Promoting Responsible Lending Models: Encourage the growth of fair, lower-cost loan products – like credit-builder loans, payday alternative loans, or lower-rate credit cards – that are designed to serve higher-risk borrowers in a sustainable way. Credit unions have pioneered many such programs under existing regulations and can do even more to reach vulnerable consumers with supportive policies instead of strict caps.
• Cracking Down on Predatory Actors: Direct regulatory enforcement toward the truly exploitative lenders who charge sky-high rates (e.g. 300% APR) or use deceptive practices. By strengthening anti-predatory lending laws and closing loopholes (for example, preventing payday lenders from evading state usury laws online), policymakers can target the real abuses at their source – rather than hamstringing reputable institutions that play by the rules.
DCUC said it believes that focusing on these targeted solutions will allow Congress and regulators to guard consumers from unfair practices while preserving their ability to obtain credit on reasonable terms.
“Credit unions have proven that you can advance financial inclusion responsibly; our very structure and history are built on that premise. Let’s strengthen that capacity, not weaken it,” Stverak wrote in his recent op-ed.
Capping Rates is the Wrong Tool
"In summary, DCUC’s stance is that a one-size-fits-all 10% interest rate cap is the wrong tool for the job of consumer financial protection. While well-intentioned, such a cap would likely curtail credit availability, hurt military families and working Americans, and drive many borrowers into worse financial straits outside the credit union sphere," the trade group stated.
“Limiting rates across the board won’t solve the problem of high-cost debt; it will just cut off access to safe and affordable options, leaving people with nowhere to turn but predatory lenders,” Stverak explained. “America’s defense credit unions remain committed to serving those who need us most, as they have for generations, and stand ready to work with policymakers on effective, balanced solutions.
DCUC urged leaders in Washington to partner with credit unions in this mission.
“We can rein in abuses without cutting off access to trusted, affordable credit. The goal we all share is to bolster consumers’ financial security, and we can achieve that without imposing heavy-handed caps that do more harm than good,” the trade group said.