Credit cards sit at the center of American household finance. They are a convenience, a safety net, and, more often than lawmakers would like to admit, a source of long-term debt carrying interest rates (which now regularly exceed 25 percent!). Previously, we looked at the Credit Card Competition Act and the fight over swipe fees, competition, and the market power of Visa and Mastercard.
Now, Congress is taking aim at a different part of the credit card ecosystem altogether, interest rates themselves with US S 381, the 10 Percent Credit Card Interest Rate Cap Act. This bipartisan bill led by Senator Bernie Sanders and Senator Josh Hawley would impose a hard nationwide ceiling on credit card interest rates. It is a blunt proposal by design, and it has quickly become one of the most polarizing consumer finance bills of the new Congress.
So what would the bill actually do, why is it back on the agenda now, and what are the real tradeoffs lawmakers are weighing? Let’s take a look!
Read the full IssueVoter analysis here.
What does US S 381 Do?
US S 381 amends the Truth in Lending Act (TILA) to cap credit card annual percentage rates (APRs) at 10 percent, inclusive of all finance charges. Importantly, the bill is written to prevent lenders from sidestepping the cap through creative fee structures.
Under the bill:
- Credit card issuers may not charge an APR above 10 percent.
- Fees that are not traditionally classified as “finance charges” cannot be used to evade the cap, and the total of those fees cannot exceed total finance charges.
- If a lender knowingly charges interest or fees above the cap, it forfeits the entire interest on the debt.
- Consumers who paid excess interest or fees can sue to recover those amounts, so long as they bring a claim within two years of the last unlawful charge.
- States remain free to impose even stronger consumer protections.
- The cap is temporary and sunsets automatically on January 1, 2031, making this a roughly ten-year experiment rather than a permanent restructuring of consumer credit.
The bill was read twice and referred to the Senate Committee on Banking, Housing, and Urban Affairs on February 4, 2025. Like many high-profile financial reform proposals, it is now waiting to see whether momentum turns into markup.
Why Interest Rates, Why Now?
Average credit card interest rates have climbed to historic highs. Forbes reported in late 2025 that the average APR hovered around 28 percent, even as large banks were able to borrow at far lower rates from the Federal Reserve. For supporters of this bill, that gap is Exhibit A as to why we need legislation like this. Credit card rates, they argue, are not simply a reflection of risk, but of market power and pricing freedom.
This debate builds directly on the themes we explored in our earlier post on the Credit Card Competition Act. There, lawmakers focused on interchange fees and the absolute dominance of Visa and Mastercard. With S 381, the target is the cost consumers face after the swipe, particularly for households carrying balances month to month.
The political incentives here matter too. Credit card debt has surged alongside inflation, and polling consistently shows strong public discomfort with high interest rates, even among voters who are otherwise skeptical of regulation. That helps explain the unusual coalition behind S 381, progressives framing the issue as consumer protection and conservatives framing it as a check on what they describe as predatory corporate behavior.
Trump’s public support for a 10 percent cap has only raised the stakes, pushing banks and trade associations into a more aggressive defensive posture.
Supporters’ case: Relief from “Exploitative” Debt - IssueVoter
Supporters describe the bill as a necessary intervention in a market that has drifted too far from its original purpose. Hawley argues that working Americans are drowning in record credit card debt while issuers post strong profits and executive compensation. Sanders frames the issue even more starkly, calling triple-digit interest payments on revolving debt morally indefensible in a modern economy.
The core claims from proponents are:
- Interest rates approaching 30 percent trap borrowers in cycles of debt that are difficult to escape.
- Credit card pricing is disconnected from banks’ actual cost of capital.
- A clear, nationwide cap is easier to understand and enforce than incremental disclosure rules.
- A sunset provision allows Congress to evaluate real-world effects before making the policy permanent.
Some supporters also see the cap as complementary to competition-focused reforms like the Credit Card Competition Act. If structural competition is slow to arrive, a temporary ceiling can provide immediate relief.
Opponents’ case: Access, risk, and Unintended Consequences - IssueVoter
Opponents do not dispute that credit card interest rates are high. Their argument is that a rigid federal cap is a blunt instrument which could shrink access to credit, especially for borrowers with thin or imperfect credit histories.
Banking and credit union groups warn:
- Many consumers would lose access to credit cards entirely, particularly higher-risk borrowers.
- Lenders would tighten underwriting standards or exit certain segments of the market.
- Consumers could be pushed toward less regulated, more expensive alternatives such as payday loans, auto-title loans, or unregulated online lenders.
- Military families and younger borrowers could be disproportionately affected, as credit unions may no longer be able to offer small-dollar, short-term credit under a 10 percent cap.
Industry opponents frequently cite international studies suggesting that interest rate caps can reduce formal lending while increasing illegal or informal credit markets. From this perspective, high rates are a symptom of risk, not exploitation, and eliminating them does not eliminate that risk.
How this fits into the Broader Credit Card Reform Debate
Taken together, S 381 and the Credit Card Competition Act (which died) represent two very different philosophies of reform. The CCCA tries to reshape the market by increasing competition among payment networks, with the hope that lower merchant costs and competitive pressures ripple outward. The 10 Percent Credit Card Interest Rate Cap Act bypasses market dynamics altogether, substituting a clear statutory limit for pricing freedom.
That contrast is important. Lawmakers who are skeptical of rewriting market structure may still support a temporary cap as a consumer protection measure. Others who favor competition-based reforms may see a hard cap as premature or counterproductive.In that sense, S 381 is not just about interest rates. It is a test of how willing Congress is to directly regulate prices in consumer finance.
Similar Bills, Different Strategies for Limiting Credit Costs
S 381 is not emerging in a vacuum. Lawmakers at both the federal and state levels are experimenting with a range of approaches to limiting the cost of consumer credit, from strict interest rate caps to narrower controls on fees. These bills show a clear trend, frustration with high borrowing costs, paired with disagreement over how aggressive regulation should be.
Hard Interest Rate Caps, for both the Nation and States
The most direct comparison to S 381 comes from proposals that impose explicit numerical caps on interest rates, either nationwide or at the state level.
At the federal level, US S 2781, the Protecting Consumers from Unreasonable Credit Rates Act of 2025, would establish a 36 percent national cap on consumer credit transactions by amending the Truth in Lending Act. Unlike S 381, which targets credit cards specifically and sets a very low ceiling, S 2781 takes a broader approach. It defines interest expansively to include fees, credit insurance premiums, late charges, overdraft fees, and even some alternative lending products. The bill also includes criminal penalties for knowing violations and requires clearer disclosure of a unified “FAIR” rate that reflects the true cost of borrowing. This bill was introduced in the US Senate and referred to the Committee on Banking, Housing, and Urban Affairs in September last year.
Several states are pursuing even stricter caps.
In New York, A 7020 would fix the maximum interest rate for credit cards at 10 percent, mirroring the federal Sanders Hawley proposal but applying only to cards issued by New York banking institutions to state residents. The bill declares any interest above that level void as against public policy, authorizes enforcement by the Attorney General, and includes a five-year sunset provision. This was introduced in the New York Assembly back in March last year, and is currently pending after being referred to banks.
Maine has taken a more moderate step with LD 201, which caps interest rates on consumer revolving loans and credit cards at 24.9 percent, down from a previous 30 percent limit for certain balances. The bill focuses on reducing the most extreme rates while preserving lender flexibility above the prime range. This bill was proposed in January 2025, but ultimately failed in March last year.
Missouri’s HB 3021 proposes a 36 percent cap on combined interest, fees, and finance charges for certain consumer loans, including small-dollar and title loans. The bill explicitly targets evasive practices and would place the question directly before voters. This bill was introduced and read back in January this year, but has not seen any further action thus far.
Targeted Caps on Credit Card Terms and Fees
Other proposals focus less on headline interest rates and more on specific features of credit card pricing that disproportionately affect consumers.
In Arizona, SB 1623 would cap credit card interest rates at 15 percent, limit late fees to $10, and prohibit merchants from imposing credit card surcharges. The bill is framed as an emergency public protection measure and applies retroactively to charges from the prior twelve months. The bill was introduced in the Arizona Senate earlier this year and was assigned to the Rules and Finance committees.
North Carolina’s H 508 takes a technical but impactful approach by lowering the maximum monthly interest rate on revolving credit accounts from 1.5 percent to 1.17 percent, equivalent to roughly 14 percent annually. It also tightens rules around late fees, advance notice of new charges, and consumer rights to cancel without penalty. The bill was introduced in March last year, and has since been referred to some appropriate committees.
At the federal level, US S 3660, or the Credit Card Fairness Act, targets late fees rather than interest rates. The bill would codify a CFPB rule capping late fees for large issuers at $8, tying permissible fees to actual issuer costs and preventing late fees from becoming a profit center. This bill was introduced in September 2025, read twice, and referred to the Committee on Banking, Housing, and Urban Affairs
What these Bills Say about Credit Card Trends
Viewed together, these proposals suggest that lawmakers increasingly see high credit card costs as a structural problem rather than a matter of individual financial behavior. The disagreement is not over whether intervention is warranted, but over how far it should go.
Bills like US S 381 and New York’s A 7020 treat interest rates themselves as the problem and respond with bright-line caps. Others, like US S 3660 and North Carolina’s H 508, focus on fee structures and disclosure, aiming to curb the most punitive practices without redefining the entire market.
That spectrum helps explain why the debate around the 10 Percent Credit Card Interest Rate Cap Act has been so intense. It sits at the most aggressive end of an already crowded reform landscape, and its success or failure will shape how Congress approaches consumer credit regulation going forward.
What happens next
As a stand-alone bill, US S 381 faces a challenging path. Banking legislation is notoriously difficult, and opposition from powerful financial industry groups is already intense. Committee action will be the key signal to watch. The sunset provision, however, may make the bill more politically viable. Lawmakers who are wary of permanent caps may be more open to a time-limited trial, particularly if public pressure over credit card debt continues to rise.
Whether or not S 381 advances, the message from Congress is clear. After years of focusing on disclosures, rewards, and competition, lawmakers are increasingly willing to ask a more fundamental question, how expensive should access to everyday credit be in the first place?
That question is unlikely to go away, even if this bill does.
Image generated by ChatGPT.
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