Klarna CEO Sebastian Siematkowski explains why he supports President Donald Trump’s push to lower credit card interest rates to 10% in ‘The Claman Countdown.’
JPMorgan Chase CEO Jamie Dimon issued a stark warning about President Donald Trump’s credit card rate hike at the World Economic Forum in Davos on Wednesday, saying it would be an “economic disaster.”
Trump said he wants to put a 10% cap on credit card interest rates for one year, saying he wants to prevent consumers from being “rip off” by credit card issuers, with interest rates that could exceed 20% for some borrowers.
When asked if Trump’s proposed rate cap was a bad idea, Dimon said during a limited discussion in Davos that while it would affect the banking business, “it will survive,” but warned that the cap would limit credit for many consumers.
TRUMP CALLS FOR A 1-YEAR 10% CAP ON CREDIT CARD INTEREST RATES
“It would be an economic disaster,” Dimon said. “It will remove the debt from 80% of Americans. And that’s their debt that supports it.”
President Donald Trump has said he wants to put a 10% break on credit card interest rates for one year. (Alexander Tamargo/Getty Images for America Business Forum)
Before doing this, Dimon said it should be tested in two states.
“They should force all the banks to do it in two states, Vermont and Massachusetts, and see what happens,” said Dimon. He did not reveal the reason for choosing the states, but the speech drew laughter from those present.
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His comments echo the concerns of JPMorgan CFO Jeremy Barnum, who said last week that the push to impose a 10% cap on credit card interest rates could hurt the broader economy and significantly reduce access to credit.
President Donald Trump has called for a one-year cap on credit card interest rates, blaming the high cost on the Biden administration. (Brent Lewin/Bloomberg via Getty Images/Getty Images)
“In fact, what will happen is that the provision of the service will change significantly. Specifically, people will lose access to credit, as a very broad and broad base, especially the people who need it,” said Barnum during a call accompanying the release of the bank’s fourth quarter earnings.
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Barnum said this would create “a very negative effect on consumers and, frankly, probably a negative effect on the economy as a whole.”
The president’s proposal follows the introduction of a bill last year by Sens. Bernie Sanders, Vt., and Josh Hawley, R-Mo., would cap credit card APRs at 10%.
Before doing this, Dimon said it should be tested in two states. (Stock)
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Richard Hunt, executive chairman of the Electronic Payments Coalition (EPC), told reporters that EPC’s analysis of the 10% credit card cap found that almost every credit card account with a credit score of less than 740 would be closed or severely restricted if the 10% interest rate cap were implemented.
That would affect 175 million to 190 million American cardholders who would lose access to their credit cards, in particular. low and middle income families. Data from the Federal Reserve Bank of New York found the average credit score for low-income Americans was 658 compared to 735 for middle-income households.
