The intersection of populist politics and global finance is set for a volatile collision as the United States’ largest banking institutions prepare to defy a presidential mandate aimed at slashing credit card interest rates. As the administration pushes for a sweeping 10% cap on annual percentage rates (APR) by January 20, the titans of the American financial sector are signaling a readiness for a protracted legal and economic battle. This confrontation, brewing for weeks in the halls of power in Washington, is expected to reach a fever pitch as world leaders and corporate elites gather for the World Economic Forum in Davos, Switzerland.
The ultimatum issued by the executive branch represents one of the most significant attempts at direct price control in the American financial sector in decades. By demanding that the industry cap interest rates at 10%—a figure roughly half the current national average—the administration is positioning itself as a champion of the consumer against "Big Finance." However, the banking industry, led by heavyweights such as JPMorgan Chase and Citigroup, argues that such a move is not only legally questionable but economically catastrophic.
During recent earnings calls and media briefings, top financial executives have been uncharacteristically blunt about the potential fallout of such a mandate. Mark Mason, the Chief Financial Officer of Citigroup, articulated the industry’s primary defense: that artificial price controls would inevitably lead to a contraction in credit availability. Mason warned that a hard cap on interest rates would "restrict access to credit to those who need it the most" and warned of a "deleterious impact on the economy." The logic from the banks’ perspective is simple: if the risk of lending to certain populations exceeds the legally allowed return, the banks will simply stop lending to those individuals.
This sentiment was echoed by Jeremy Barnum, CFO of JPMorgan Chase, who indicated that the industry is keeping "everything on the table," including aggressive litigation to block the implementation of any such cap. The banking sector’s defiance rests on a bedrock of legal and economic precedents. Currently, there is no federal law that imposes a national ceiling on credit card interest rates. While some states have usury laws, a 1978 Supreme Court ruling in Marquette National Bank of Minneapolis v. First of Omaha Service Corp. largely deregulated the industry by allowing national banks to charge the interest rates permitted in their home states, regardless of where the customer resides.
To understand the scale of this conflict, one must look at the current state of the American consumer. Total credit card debt in the United States recently surpassed $1.13 trillion, according to data from the Federal Reserve Bank of New York. As the Federal Reserve maintained higher interest rates to combat inflation over the past two years, the average credit card APR has climbed to between 21% and 25%, with subprime borrowers often facing rates exceeding 30%. For an administration looking to shore up support ahead of critical midterm elections, the narrative of "ending the rip-off" of high-interest debt is a powerful populist tool.
However, the economic mechanics of the credit card business are complex. Banks argue that interest rates are not purely profit; they are a mechanism for pricing risk. Credit cards are unsecured debt, meaning there is no collateral for the bank to seize if a borrower defaults. If a 10% cap were enforced, banks argue they would lose the ability to offset the losses incurred by defaults. This would likely result in the mass closure of accounts for millions of Americans with lower credit scores, effectively pushing them out of the formal financial system and toward more predatory "fringe" lenders, such as payday lenders, who often operate under different regulatory frameworks.
The administration has also expanded its offensive to include merchant "swipe fees"—the interchange fees that retailers pay to banks and card networks like Visa and Mastercard every time a customer taps a card. By endorsing the Credit Card Competition Act, the administration aims to break the "duopoly" of the major card networks, potentially saving merchants billions of dollars. While retailers have long lobbied for this change, banks argue that these fees fund essential services, including fraud protection and popular consumer rewards programs.
Despite the aggressive rhetoric emanating from the White House, industry lobbyists and insiders remain skeptical about the feasibility of the 10% cap. Five days after the initial threat was issued via social media, major financial institutions reported that they had received no formal written guidance or regulatory framework from the Treasury Department or the Consumer Financial Protection Bureau (CFPB). This lack of documentation has led some to believe that the threat may be more of a tactical "opening gambit" in a larger negotiation rather than a literal policy directive.
Market analysts have drawn parallels between this situation and the administration’s previous dealings with the pharmaceutical industry. In that instance, the threat of extreme price controls was used as leverage to secure more moderate concessions on drug pricing. Tobin Marcus, an analyst at Wolfe Research, suggested that the administration might be following a "dealmaking-under-threat" model. By demanding a 10% cap—which is widely viewed as unworkable—the President may be positioning himself to "settle" for smaller concessions, such as a reduction in certain fees or a more modest cap on late penalties.
The political landscape further complicates the path to a 10% cap. While the President has threatened that non-compliant banks will be "in violation of the law," the legislative path is fraught with obstacles. Several key members of the President’s own party in Congress, including House Speaker Mike Johnson, have expressed deep reservations about government-mandated price controls, viewing them as an affront to free-market principles. Without a new act of Congress, any executive attempt to enforce a rate cap would likely be met with an immediate injunction from the courts.
The global context of this fight cannot be ignored. In Europe and the United Kingdom, regulators have been much more aggressive in capping interchange fees, but they have generally shied away from setting hard caps on interest rates, preferring instead to focus on "affordability assessments" and consumer protections. Brazil recently implemented a cap on revolving credit interest, but the economic conditions and banking structures in emerging markets differ significantly from the highly developed, credit-dependent economy of the United States.
As the January 20 deadline approaches, the focus shifts to Davos. The annual gathering of the World Economic Forum provides a surreal backdrop for this domestic American dispute. Treasury Secretary Scott Bessent and major CEOs, including JPMorgan’s Jamie Dimon, are expected to be in attendance. The President’s history at Davos is one of disruption; in previous years, he used the platform to accuse major banks of political discrimination. The upcoming summit will likely serve as a theater for this power struggle, with the President using the world stage to double down on his populist demands while bank executives attempt to reassure global investors of the stability of the U.S. financial system.
Ultimately, the standoff represents a fundamental disagreement over the role of government in the private sector. For the administration, it is a matter of protecting vulnerable citizens from predatory practices in an era of high living costs. For the banks, it is a matter of protecting the risk-based pricing models that underpin the entire modern credit system. If the administration moves forward with an executive order or a similarly aggressive regulatory maneuver, the resulting legal battle could reach the Supreme Court, potentially redefining the limits of executive power over the financial industry.
For now, the banking sector is betting on its ability to outlast the rhetoric. By threatening to close accounts and withdraw credit from the market, they are highlighting the "pain" that would be felt by the very voters the administration is trying to court. Whether this leads to a genuine "deal" or a historic rupture in the relationship between the White House and Wall Street remains the most pressing question for the American economy in the opening weeks of the year. In the balance lies not only the profitability of some of the world’s largest corporations but also the daily financial lives of millions of Americans who rely on plastic to navigate their world.
