Daniel Rosen argues Biden's plan to cap credit card late fees, cutting them from $32-$38 to $8, prompted issuers to raise interest rates as high as 39.99% to recoup lost revenue. He says the policy meant to help Main Street ended up benefitting Wall Street instead.
You said that credit card interest fees are jumping to as high as 39.99%. Is that really true? Yeah. So here's what's happening. President Biden was trying to pass something called protection, essentially bringing down late fees from 32 to $38, all the way down to $8. Now, a lot of people thought that this is amazing and this is going to be a great thing. I was a little bit hesitant thinking about this, because if you look at a lot of states, you're seeing default and delinquency rates, double digits right now. And so why would credit card companies lend money to a consumer that has very little incentive to pay back an $8 late payment fee is like, nowadays. And now what's happening is credit card companies, they're increasing their interest rates because they're looking to offset this potential incoming change. So basically, credit card companies can charge any interest rate that they want. And so now it's basically turned into this situation where they pretended like this was a great thing for Main street, but at the end, Wall street wins.
