Bernie Sanders and Alexandria Ocasio-Cortez have proposed legislation to cap interest rates on credit cards and other consumer loans at 15 per cent in an effort to help consumers grappling with growing credit card debt.
The proposal by the Vermont senator and New York congresswoman also called for the US Postal Service to provide basic banking services as a way to provide new, affordable competition to traditional banks.
“There is no reason a person should pay more than 15% interest in the United States,” Ms Ocasio-Cortez tweeted. “It’s a debt trap for working people + it has to end.”
While Mr Sanders is running for the Democratic Party’s nomination for president, Ms Ocasio-Cortez has emerged as one of the most high-profile Democrats in Congress since winning her seat in 2018.
The bill would place significant restrictions on short-term loans, such as payday loans, that can rely on significantly higher interest rates, as well as cut into profits from traditional banks. The average interest rate on credit cards is currently 17.73 per cent, according to an industry survey by CreditCards.com - the highest level since the site began tracking rates in 2007.
The bill would allow the Federal Reserve to temporarily permit higher borrowing rates if needed to help keep institutions afloat, but for no more than 18 months. It also would not prevent states from establishing lower maximum interest rates.
The measure marks the first time that Ms Ocasio-Cortez has helped author a bill taking aim at the financial industry. The freshman Democrat from New York has a seat on the House Financial Services Committee.
The bill is unlikely to become law with Republicans in control of the Senate and the White House, however, and expected intense opposition from the financial services industry. But it could present a potent campaign issue to Democrats jockeying for support in a crowded 2020 presidential nominating field.
With over 20 candidates competing for the party’s nomination, many Democrats have seized on a populist, anti-Wall Street message that resonates with voters. Several high-profile candidates, like Senators Kamala Harris of California and Cory Booker of New Jersey, have pushed for policies that would curb the financial industry and provide better support to struggling borrowers.
Senator Elizabeth Warren, who is also seeking the Democratic nomination, largely built her political reputation on taking on Wall Street after the financial crisis and helping to build the Consumer Financial Protection Bureau.
Reuters contributed to this report
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