Business
Commentary: Trump is demanding a 10% cap on credit card interest. Here’s why that’s a lousy idea
A few days ago, President Trump staked a claim to the “affordability” issue by demanding that banks cap their credit card interest rates at 10% for one year.
Actually, Trump announced that in effect he had imposed the cap, a claim that some news organizations accepted as gospel.
So let’s dispose of that misconception right off: Trump has zero power to cap interest rates on credit cards. Only Congress can do so.
The idea of a 10% rate cap has all the seriousness of bread-and-circuses governance.
— Adam Levitin, Georgetown Law
More to the point, his proposal, announced via a post on his TruthSocial platform, is a terrible idea. It’s half-baked at best, and harbors unintended consequences by the carload — so much, in fact, that the putative savings that ordinary households could see from the rate reduction might be diluted, or even reversed, by the drawbacks.
Still, the idea has so much consumerist appeal that it placed Trump in accord with some of his most obdurate critics, such as Sen. Elizabeth Warren (D-Mass.), who has been pressing to place limits on bank fees for years. Warren said she and Trump had a phone conversation in which they seemed to have talked companionably about the issue.
Trump’s announcement did have the salutary effect of placing the issue of financial services costs on the front burner, after its having languished for years. But it obscured the immense complexities of making any such change.
“Certainly this demonstrates a populist streak on both sides of the aisle,” says Adam Rust, director of financial services at the Consumer Federation of America. “But you can’t just write a tweet and upend a huge market.”
The market for credit cards is indeed huge. As of 2024, credit card debt in the U.S. exceeded $1.21 trillion. This is the most profitable line of business for many banks, producing $120 billion in interest income and $162 billion in fees, chiefly those the card issuers impose on merchants.
“Almost 30% of that is pure profit,” reported Brian Shearer of Vanderbilt University, a former official at the Consumer Financial Protection Bureau, in a 2025 study.
So it should come as no surprise that the entire banking industry has circled the wagons against a cap on credit card interest rates, especially one as stringent as 10%. On Jan. 9, the very day of Trump’s announcement, five leading bank lobbying organizations issued a joint statement asserting that a 10% cap would be “devastating for millions of American families and small business owners who rely on and value their credit cards, the very consumers this proposal intends to help.”
Among its drawbacks, the statement said, “this cap would only drive consumers toward less regulated, more costly alternatives.”
It’s tempting to dismiss the statement as the normal grousing of a big industry about a government regulation. Banks have acquired a certain reputation for profiteering from customers, especially less well-heeled customers, and playing fast and loose with the facts about their costs and profits. But the truth is that on this topic, they have a point.
Let’s take a look, starting with some basic facts — and misconceptions — about credit cards.
The credit card market is heterogeneous, segmented by income and more importantly by credit score. Those with the highest FICO scores typically get the lowest interest rates, but are also more inclined to pay off their balances every month without incurring any fees, even as their average balances are the highest.
About 40% of all users, including many with middling credit scores, pay off their balances monthly but use their cards for convenience, to access fraud protections provided by credit cards but not by other forms of credit, and to garner card rewards.
Interest fees aren’t the issuers’ sole source of revenue. Most revenue comes at the other end of the transaction, in interchange or “swipe” fees paid by merchants.
That’s why card issuers still cherish high-income transactors and shower them with rewards — the monthly balances of users in the 760-to-840 FICO score range vastly exceed those of other users, indicating that they’re generating correspondingly more in interchange fees from the merchants they patronize.
The average interest rate on credit cards reached 25.2% last year, according to a December report by the Consumer Financial Protection Bureau. It has steadily increased since 2022, mostly because of an increase in the prime rate, the benchmark for card issuers.
How did it get so high? Blame the Supreme Court, which in 1978 undermined state usury laws by ruling that banks could charge customers the usury rate of their home state rather than the rate in the customer’s state. That’s why your credit card may be “issued” by a bank subsidiary in Utah, South Dakota or Delaware, which have lax usury limits. The solution would be enactment of a nationwide usury limit, but that falls entirely within congressional authority.
So what would happen if Congress did place a limit on the maximum credit card interest rate — if not 10%, then 15% or 18%, as has been proposed in the past? Shearer contends that banks make such fat profits from credit card users at every FICO level that they could still earn healthy returns even at a 15% cap. Shearer estimated that a cap of 15% would produce more than $48 billion in annual customer savings “coming almost entirely out of bank profits.”
Other analysts are not so sanguine. “There is no free lunch here,” argues Adam Levitin, a credit market expert at Georgetown law school. Levitin argues that while issuer profits are large, their margins are not so large. He calculates that a 10% cap would make the general credit card business unprofitable, because there wouldn’t be enough headroom over the benchmark prime rate (currently 6.75%) to cover administrative costs and other overhead.
Issuers don’t have many options to preserve their profitability. So they’re likely to respond by shutting the door on low-income and low-FICO customers and ratcheting back credit limits.
“The effects will be devastating,” Levitin says. “Families that need the short-term float or the ability to pay back purchases over several months won’t have it. How will they pay for a new water heater when the old one goes out and they don’t have $3,000 sitting around?”
Many will be forced to resort to other short-term unsecured lenders — payday lenders, buy-now-pay-later firms and others that don’t offer the consumer protections of credit cards and would be exempt from the interest cap on credit cards.
“The idea of a 10% rate cap,” Levitin says, “has all the seriousness of bread-and-circuses governance.”
The availability of credit from alternative consumer lenders that don’t offer the statutory protections mandated for credit cards concerns consumer advocates.
A hard cap on interest rates “could create a sharp contraction in the kind of credit available in the marketplace,” says Delicia Hand of Consumer Reports. “It sounds good, but there could be unintended consequences, especially if you don’t think about what fills the gap,”
Alternative products aren’t regulated as stringently as credit cards. “Direct-to-consumer products can layer subscription fees, expedited access fees, and ‘voluntary’ tips in combinations that produce effective annual percentage rates ranging from under 100% to well over 300% — and in some documented cases, exceeding 1,000% when annualized for frequent users,” Hand said in remarks prepared for delivery Tuesday to the House Committee on Financial Services.
If an interest rate cap is too tight, all but the highest-rated customers might face higher annual fees and stingier rewards. Issuers are likely to squeeze merchants too. Big businesses — think Costco and Amazon — might be able to negotiate swipe fees down and eat the remainder instead of passing them through to consumers. But small neighborhood merchants might refuse to accept credit cards for purchases below a certain amount, or add a swipe fee surcharge to customers’ bills.
Other complexities bedevil proposals like Trump’s, or for that matter bills introduced last year in the Senate by Bernie Sanders (I-Vt.) and Josh Hawley (R-Mo.) and in the House by Reps. Alexandria Ocasio-Cortez (D-N.Y.) and Anna Paulina Luna (R-Fla.), capping rates at 10% for five years. Those measures have the virtue of simplicity — they’re only three pages long — but the drawback, also, of simplicity.
Among the open questions, Levitin observes, are whether the 10% cap would apply to all balances or just to purchases. If the former, it remakes credit cards into tools for “low-cost leverage for cryptocurrency speculation and sports betting,” because in today’s interest rate environment it’s cheap money.
Trump’s announcement, in particular, displays all the drawbacks of insufficient cogitation characteristic of so many of his ventures. Published on Jan. 9, it called for the cap to be implemented on Jan. 20, the anniversary of his inauguration: a mere 11 days to implement a change in a $1.21-trillion market with potential ramifications on a dizzying scale.
Since he doesn’t have the authority to mandate the cap by executive order, he’s in effect calling for the banks to make the change voluntarily. Given the impact on their profits, on the gonna-happen scale, that’s a “not.”
Adding to the sour ironies of this effort, Trump’s far-right budget director, Russell Vought, has been pursuing a vicious campaign to destroy the agency with statutory authority over the consumer lending industry, the CFPB — of which Trump appointed Vought acting director.
Vought also rescinded a Biden-era CFPB rule reducing credit card late fees to no more than $8 from as much as $41—further undermining Trump’s attempt to pose as a friend of the credit card customer.
Consumer advocates are pleased that the debate over card fees has placed financial services costs squarely in the “affordability” debate, where they belong.
There’s no question that capping card interest rates at some level could bring savings to consumers to maintain monthly balances — “revolvers,” in industry parlance. “It could be worth several bags of groceries a month, or a tank of gas,” Rust conjectures — “significant savings for millions of people.”
The challenge is finding “where the right level is, balancing risk and availability,” he told me. “That’s not clear at the moment.”
Robotaxis could be turning into robocops.
A self-driving Waymo reported two teens to San Mateo, Calif., police on Monday after they were found drinking alcohol and shooting toy guns in the back of the vehicle.
According to a social media post from the San Mateo Police Department, officers detained two 15-year-olds after the Waymo they were riding in contacted the department and stopped in a parking lot until law enforcement arrived.
“Parents do you know where your teens are?” the San Mateo Police Department wrote on Facebook following the incident. “Waymo does!”
Officers removed both teens from the vehicle and determined they were using toy guns to shoot Orbeez out the windows. Orbeez are small, water-absorbing beads sold at toy stores.
“Toy guns, water guns, and BB guns all pose real dangers, especially to an untrained eye,” the Police Department said. “The simple handling of them can cause fear in [passersby].” “
A video posted on Facebook shows at least five officers and a police dog responding to the scene and approaching the Waymo with their weapons raised.
Waymo did not immediately respond to a request for comment.
Waymo vehicles have internal cameras and microphones that may be used in an emergency or to “promote safety and security,” according to Waymo’s online support page.
The cameras are also used to ensure the vehicles are clean and to help find lost items, according to the support page.
The company said it does not use facial recognition or other biometric identification technologies to identify individuals.
“In more urgent circumstances, support may access live video during a trip,” the Waymo page said.
The San Mateo Police Department’s Facebook post has garnered nearly 60 comments, with one user accusing Waymo of “snitching.”
“At least they got a designated driver?!” one user commented.
Business
Commentary: How right-wing anti-transgender attacks led to a Supreme Court ruling upholding sex discrimination
At the Supreme Court, the unfounded fear of boys masquerading as girls in youth sports rolled the clock back on gender equality.
On the surface, the Supreme Court’s June 30 opinion upholding state laws barring transgender girls from women’s and girl’s sports teams looks like a victory for women’s rights.
The 6-3 opinion by Justice Brett M. Kavanaugh certainly presents itself that way. “Females and males have inherent physical differences relevant to athletic performance,” Kavanaugh wrote. “Therefore, in contact sports, forcing female athletes to compete against males can create significant safety risks.” He also asserted that “forcing female athletes to compete against males can undermine competitive fairness.”
The ruling applied to prohibitions enacted in Idaho and West Virginia against “biological” males’ participation on women’s teams in public schools. Federal judges in both states overturned the bans. The Supreme Court majority restored them. The ruling essentially upholds similar bans enacted in 25 other states.
There was no record of any transgender person participating in school sports in the State, let alone any ‘problem’ with transgender students … creating unfair competition or unsafe conditions.
— Justice Sonia Sotomayor, demolishing the Supreme Court’s argument in favor of banning transgender girls from girl’s sports
Kavanaugh, like Donald Trump and others in the anti-transgender camp, maintained that one’s gender is an immutable fact of life, established even before birth.
Anything else, Trump stated in an executive order he issued on inauguration day 2025, could only be the product of “gender ideology extremism.” The U.S., his order stated, recognizes “two sexes, male and female. These sexes are not changeable and are grounded in fundamental and incontrovertible reality.” That’s a “biological truth,” he declared.
In his own version of this overconfident and factually insupportable conclusion, Kavanaugh wrote: “As all agree, females and males have inherent physical differences relevant to athletic performance.”
Science recognizes that some people are “born with sex traits that don’t fit into typical male or female patterns,” to cite a discussion on the Cleveland Clinic web page on the topic “intersex.” The condition “may involve chromosomes, hormones, reproductive organs or genitals.”
From a psychological standpoint, medical science recognizes “gender dysphoria” as a real condition often requiring counseling and medical intervention such as the use of puberty blockers and hormones to stave off the development of secondary sex characteristics until the condition can be resolved.
No one disputes that there are physical differences between the sexes. Few would dispute that on average or even at the median, males may be bigger and more powerful than females, or that in certain contact sports the difference may be telling and on occasion dangerous.
But that’s not the same as asserting that the physical differences between males and females invariably mean that men will invariably prevail over women in all competitions or that their participation will endanger women.
The International Olympic Committee — in a policy statement Kavanaugh cited incompletely — says that in “most running and swimming events,” males have a 10% to 12% advantage over women. That’s a range that would accommodate the full spectrum of outcomes — transgender females win, cisfemales win, they tie. (The “cis” prefix denotes those living consistent with their birth gender.)
West Virginia and Idaho addressed this ambiguity by banning transgender women from all girls’ teams. So under their rules transgender girls can’t play football or soccer with cisgirls. But what’s the argument in favor of banning them from the 100-yard dash, or cross-country track, or diving, or archery?
But something else is going on here. The Supreme Court’s ruling was almost preordained, given the years-long campaign by conservatives to demonize transgender individuals as if they’re members of an alien species.
It will be recalled that during his presidential campaign, Trump spun a despicable fantasy in which children were kidnapped in school and secretly subjected to sex-change operations.
Trump’s executive order wiped out policies aimed at protecting transgender adults from discrimination. He moved to outlaw gender-affirming medical therapies for anyone under 19 by cutting off federal funding for healthcare institutions that provide such care.
He banned transgender individuals from serving in the military and ordered federal prison officials to move transgender inmates into the general populations consistent with their birth genders, which exposes them to physical assault. (Federal Judge Royce Lamberth of Washington, D.C., has blocked the government from transferring three transgender women into the male prison population or terminating their hormone treatments.)
I wrote during Trump’s first term, when his anti-transgender policies were still gestating, that the goal was to show that “one can target any community, as long as it doesn’t have a strong political voice or political power. These are the actions of bullies and cowards, pretending to be strong.”
Last year, the Supreme Court struck its first blow against transgender rights by upholding a Tennessee law banning transgender care, including puberty blockers and hormone therapy, for minors. Similar laws have been enacted in 25 other states. The majority in that ruling by Chief Justice John G. Roberts Jr. was identical to the one in the June 30 ruling — Roberts, Kavanaugh, and Justices Clarence Thomas, Samuel A. Alito Jr., Neil M. Gorsuch and Amy Coney Barrett.
Who are the targets of this ideological campaign? They number only about 1.6 million U.S. adults, or one-half of 1% of the U.S. population. About 300,000 adolescents ages 13 to 17, or 1.4%, identify as transgender, according to a study by UCLA School of Law.
In West Virginia, as Justice Sonia Sotomayor observed in her dissenting opinion, “there was no record of any transgender person participating in school sports in the State, let along any ‘problem’ with transgender students … creating unfair competition or unsafe conditions.”
In endorsing the flat bans directed at transgender women in Idaho and West Virginia, Kavanaugh argued that any attempt to implement case-by-case judgments of students’ requests to join sports teams inconsistent with their biological gender would create “an enormous practical and administrability problem.”
Is that so? That wasn’t the case in Maine, where the annual K-12 population is more than 170,000. There, a committee was charged with determining whether a student’s participation in a sport consistent with their gender identity but inconsistent with their biological sex would “result in an unfair athletic advantage” or present a risk of injury to others. The committee held 56 hearings from 2013 through 2021, or an average of seven per year. During the entire time span, only four involved transgender girls. (The outcome of those hearings couldn’t be learned.)
It was Maine’s policy, one might recall, that provoked a confrontation between Trump and Maine Gov. Janet Mills at the White House last year, when Trump threatened to withhold federal funding from the state unless it barred transgender students from competing on women’s sports teams. “We’ll see you in court,” Mills snapped.
Whether the Idaho and West Virginia laws genuinely protect girls from unfair competition is questionable. (The Idaho law is styled the “Fairness in Women’s Sports Act.”) In practice, the laws may subject women in public schools to “invasive sex verification procedures,” as educational expert George Theoharis of Syracuse University wrote after the court ruling.
They’re also based on a retrograde view of women as fragile creatures needing men’s protection, Theoharis wrote — “the same logic that has historically been used to justify excluding women from making their own healthcare decisions and girls from rigorous math and science; that physically demanding work is simply beyond them.” (There don’t appear to be any state laws barring transgender women from competing in men’s sports.)
Becky Pepper-Jackson, the plaintiff in the West Virginia case, in which she is identified only as B.P.J., is the only transgender girl who sought to join girl’s teams — track and cross-country — in the state. That was in 2021, just after West Virginia passed its law and she was about to enter sixth grade. She didn’t appear to pose any competitive risk to others on the track and cross-country teams she applied to join — her lawyers told the Supreme Court that on those no-cut teams, she “came in near the back.”
Anyway, she had not gone through male puberty, which theoretically might have endowed her with a competitive advantage, because she had been taking puberty blockers and female hormones.
Thanks to the court’s ruling, Sotomayor observed in a dissent joined by Justices Elena Kagan and Ketanji Brown Jackson, West Virginia can deny Becky access to school sports “because it thinks they have an inherent athletic advantage, even if the facts show that they do not.”
B.P.J., Sotomayor wrote, “cannot practice on girls’ teams, even if she would not take anyone’s spot in an eventual competition, even if everyone who tries out for the team makes it, and even if having the chance to participate could aid immensely in treating B. P. J.’s gender dysphoria.”
So whose interest was really protected by the Supreme Court?
An Orange County real estate investor accused of criminally defrauding an Arizona bank of nearly $100 million pleaded not guilty Monday and remains in custody.
Mahender Makhijani, 44, of Corona del Mar — who also was ordered by an arbitrator to pay $1.34 billion in a separate civil fraud case — was arraigned in Santa Ana federal court on two charges.
He is accused of bank fraud and making a false statement to a bank in a June 8 case involving a $100 million real estate loan made by Phoenix-based Western Alliance Bank. He was taken into custody on June 10.
Makhijani is accused of providing bogus collateral for the October 2024 loan now in default. In a civil lawsuit, Western Alliance said the outstanding balance as nearly $99 million.
Prosecutors say he falsified title insurance policies that showed the bank would have a first lien on the underlying collateral if the loan went bad, when in fact it did not.
A trial was set for August 11 before U.S. District Judge David O. Carter in Santa Ana.
Michael Schachter, his criminal defense attorney, did not respond to messages seeking comment.
In the civil case, an arbitrator in May ordered Makhijani to pay Laguna Beach real estate mogul Mohammad Honarkar $1.34 billion after ruling he had fraudulently induced him into a 2021 joint venture — and then wrested control and lost to creditors more than two dozen properties Honarkar had owned.
Makhijani has not been criminally charged in that case, but prosecutors alleged in an affidavit in support of the bank fraud charges that he used “force and threats” in his dealings with Honarkar and others — including taking over the landmark Hotel Laguna in 2023 that Honarkar was renovating.
Prosecutors sought to hold Makhijani without bail after his arrest.
The affidavit noted he is a legal Indian immigrant with a home and bank accounts in that country, has access to private jets and threatened to “run away” if caught in a difficult situation.
The request was denied and he was granted $500,000 bail.
However, Makhijani remains in custody after a hearing sought by prosecutors last month before Magistrate Judge Autumn Spaeth.
The judge declined to accept a $450,000 cashier’s check submitted by a Makhijani associate for the bail, finding insufficient proof the source of the funds was legitimate, according to court records.
Makhijani is not prominent outside Orange County real estate circles, but he established a thriving distressed-assets business over the last decade that attracted prominent Southern California real estate investors.
Prosecutors said it paid for a lifestyle that included two multimillion-dollar homes in Corona del Mar, a luxury apartment in Newport Beach and various luxury vehicles.
As of last month, prosecutors had not fully traced his assets, which they believe are not held in his name and some of which may be in India.
The businessman employed an array of shell companies and strawmen to sign documents on his behalf, and to stand in for him as operators of his companies, according to the affidavit.
Makhijani told an associate he took extra precautions because wanted to insulate himself from litigation and that “they were sharks in the distressed world who took advantage of people,” the affidavit stated.
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