(Jan 15): Citigroup Inc chief financial officer Mark Mason said the lender wants to cooperate with US President Donald Trump’s affordability push but doesn’t support his proposed cap on credit card fees.
A “cap would likely result in a significant slowdown in the economy”, Mason said on Wednesday on a call with reporters after the bank reported fourth-quarter results. He added that affordability is an important issue that Citi wants to collaborate with the administration on, but “an interest rate cap is not something that we would, or could, support, frankly”.
Trump has taken aim at Wall Street’s credit card businesses. Last Friday, he announced a 10% cap on card interest rates, with a deadline of Jan 20. This week, he called on lawmakers to support legislation that targets interchange fees.
Banking industry groups have said that a 10% limit on rates threatens to cut credit availability to certain customers, especially those with subprime credit scores.
“Studies in the US have shown a vast majority of consumers and businesses would lose access to credit cards,” Citigroup chief executive officer Jane Fraser said on call with analysts. “They would be forced to pursue more predatory alternatives, and you would only be left with the wealthy having access to credit cards. And nobody wants that.”
If such a restriction was put in place, it would also be a huge hit to a key revenue stream for the US banking sector. JPMorgan Chase & Co CFO Jeremy Barnum said on Tuesday that a 10% limit would require “significant” changes at its cards operation. Citigroup is one of the largest issuers, with revenue from its branded cards unit totalling US$2.95 billion ($3.80 billion) in the fourth quarter, up 5% from a year earlier.
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“We would also see some of the domino effects ricocheting through retail, travel, hospitality sectors and much broader impact on gross domestic product,” Fraser said.
Bank of America Corp CEO Brian Moynihan echoed concerns over a possible cap on an earnings call on Wednesday, saying capping rates would restrict credit. In a CNBC interview later in the day, Moynihan said consumers would need a Fico score “well into the 700s” under the proposed rate cap to qualify for credit cards — a small portion of the US population — and would force people to use payday lenders and other sources outside the regulated banking industry in search of credit.
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