WASHINGTON—NAFCU, CUNA, and the Defense Credit Union Council (DCUC) have urged the Senate to oppose the effort by Sen. Josh Hawley (R-MO) to attach his Capping Credit Card Interest Rates Act (S. 2760) as an amendment to a proposed “minibus” appropriations bill.
The legislation would cap credit card APRs at 18%.
The credit union trade groups said in their letter that the average credit union credit card interest rate is significantly lower than the statutory limit, but argued the cap – which would include all associated fees and penalties in an arbitrary formula – could affect credit unions’ “ability to compete with other credit card issuers and could face difficulties supporting a credit card program during periods of high interest rates.”
‘Forced to Turn Elsewhere’
“Proponents of a cap on credit card fees and interest believe that it would help consumers, especially subprime borrowers with less-than-perfect credit histories,” the groups wrote. “In reality, many consumers who currently rely on credit cards would be forced to turn elsewhere for short-term financing needs, including pawn shops, online lenders—or worse—loan sharks, unregulated online lenders, and the black market.
“A credit card rate and fee cap, however calculated, will mean depository institutions like credit unions will be unable to offer these affordable, unsecured small dollar loans,” the letter continued. “For a loan product like a credit card to be sustainable, depository institutions must be able to recover costs. Costs include not only the cost of funds, but also costs related to compliance, customer service, IT, underwriting, administration, and defaults (including losses),” they added.
Work Done by CUs is Cited
The trades cited in the letter the ways credit unions work with members to support financial well-being, including credit counseling, debt restructuring, loan consolidation, and consumer financial education.
The groups called on Congress to address excessive consumer debt “without creating barriers in accessing safe and affordable credit products, pushing people with marred credit histories and those on the financial fringe to unscrupulous and unregulated lenders, and discouraging future innovation and new products.”
Virginia League Warns of Costs from Shutdown
Separately, the Virginia Credit Union League is reporting it has written to each member of its state congressional delegation, urging them to “avoid a government shutdown and the hardships that would follow for Virginians and the Commonwealth.”
The league said that during meeting it held in Washington and during its legislative receptions held during the congressional recess, member credit unions and the league urged lawmakers to consider the impact a shutdown of the federal government would have on the Commonwealth, “given the concentration of federal government employees, military operations, and federal government contractors in Virginia.”
The VCUL said CUs in the state are now preparing to aid members affected by a government shutdown. In previous shutdowns, credit unions have offered skip-a-payment plans, 0% loans, 0% lines-of-credit, and more to aid members.
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