What would be the impact of a credit card interest rate cap?

New legislation in Congress that was introduced by an unlikely duo of senators seeks to impose a credit card interest rate cap, with the potential for such a bill becoming law aided by President Donald Trump’s campaign pledge on the subject.

Sens. Bernie Sanders, I-Vt., and Josh Hawley, R-Mo., introduced legislation that would cap credit card interest rates at 10% for five years after the bill’s enactment. The two populist senators touted the measure as a means of fulfilling a campaign pledge made by Trump’s campaign last year.

The bill’s introduction coupled with White House support for the proposal could allow for the idea to gain traction, although there would be consequences to the policy and it still faces a long road to enactment.

“Credit card rate caps have always been the longest of long shots because there’s so many people lined up against it for various reasons, but it shouldn’t surprise anybody that a rate cap is enormously popular,” Matt Schulz, chief credit analyst at LendingTree, told FOX Business.

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Schulz said that LendingTree conducted a poll that showed respondents continued to support the idea of a credit card interest rate cap even if it means restricted access to credit and diminished credit card rewards.

“It’s still a long shot, but there’s no question that the idea politically kind of has some wind at its back right now, and if it’s ever going to happen, this may be as likely a time as ever for it to happen,” he said.

Schulz added that credit cards offered by federally chartered credit unions are capped at 18%, which do still offer rewards but aren’t as lucrative as those offered by larger banks. He went on to say that a cap at that level or 20% would be significant for consumers dealing with credit card debt while potentially having a better chance at becoming reality.

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Several leading trade groups representing the financial services industry sent a letter to Hawley and Sanders outlining their opposition to the duo’s proposed 10% credit card interest rate cap. Signatories to the letter included the Consumer Bankers Association, America’s Credit Unions, American Financial Services Association, Bank Policy Institute, Independent Community Bankers of America, American Bankers Association and the National Bankers Association.

The letter cited economic research showing that government price setting on APR caps hurts consumers, in part because it “would eliminate access to credit cards for millions of consumers and drive them to sources of credit which are far more costly and less regulated.”

The groups noted the state of Illinois imposed a rate cap, which the Federal Reserve researched and found was responsible for reducing the number of loans to subprime borrowers by 38 percent. They also referenced a study by researchers at Dartmouth who found Oregon’s 36% all-in APR cap was responsible for “harming, not helping, consumers on average” and “restricting access caused deterioration in the overall financial condition of Oregon households.”

“As responsible and well-regulated financial institutions, we share the goals of reducing the cost of consumer credit and increasing financial inclusion. Unfortunately, the 10 percent rate cap proposed in this legislation would stifle our shared financial inclusion goals, reduce access to credit and push consumers to far more costly and less regulated lenders,” the groups wrote.

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While it’s unclear whether Congress will consider legislation capping credit card interest rates, Schulz noted that there are still steps consumers can take to ease their financial burden.

“The good news is that there are plenty of things you can do yourself to lower your interest rates without waiting for Congress to come in as the cavalry in lowering rates. You can get a 0% balance transfer credit card if you have good credit. You could look at a low interest personal loan, that’s a good option if you can’t get a 0% balance transfer card,” he said.

“You can even call your credit card issuer and ask for a lower rate. LendingTree did a survey last year where we found that 76% of people who asked for a lower interest rate on one of their credit cards got one, and the average reduction was about 6 percentage points which is really significant,” Schulz said. “So it’s absolutely worth the call, because that sort of success rate shows that it’s not just people with 800 credit scores and long track records who are getting their way – it’s regular folks too who really need the help.”