ABA yesterday warned lawmakers of the potential consequences of imposing interest rate caps on consumer credit products. At a time when nonbanks are increasingly seeking to provide financial products to consumers outside of the heavily-regulated banking system, ABA cautioned that overly-aggressive legislative proposals to address abuses by these entities could ultimately restrict credit access, particularly for borrowers who are most likely to face credit challenges.

“Legislation to cap lending prices is not as advertised by some advocates: It is more than just ‘interest rate caps’ and would undermine basic presumptions about how consumer credit markets operate,” ABA said in a statement submitted for the record of a House Financial Services Committee hearing. These proposals “likely would significantly reduce access to good mainstream financial products such as credit cards,” in addition to raising costs. For example, ABA highlighted new data demonstrating that if Congress were to impose an all-in rate cap equivalent of 27%, 13.8 million subprime borrowers could lose credit access.‌

ABA emphasized that credit card interest rates should be determined by market forces. “Card issuers currently set credit card interest at appropriate rates given a borrower’s risk level. If issuers were required to keep rates artificially low, many consumers would lose access to credit, which myriad studies have shown has real, damaging effects on households.”

Read ABA’s testimony.

In a comment letter on Monday, ABA urged the Postal Regulatory Commission not to move forward with its decision to replace the consumer price index cap on United States Postal Service pricing with a new system that would effectively allow the USPS to raise postal rates as volume declines. The association warned that such a change “will accelerate the Postal Service’s decline,” and cause many ratepayers to leave the system permanently.

The letter came in response to a revised notice of proposed rulemaking for the statutory review of the system for regulating rates and classes for market dominant products. ABA noted that in general, the proposal places too much emphasis on assuring adequate revenues for the USPS and does not meaningfully incentivize the USPS to pursue efficiency and cost reductions.

With the exception of proposed improvements to workshare pricing discount programs, ABA urged the PRC to reconsider the majority of the proposal. “For bankers, stability, predictability and just and reasonable rates are paramount, and it is not clear. . . how the PRC has considered these factors.” Read the letter. For more information, contact ABA’s Robin Cook.

The Federal Trade Commission is observing Tax Identity Theft Awareness Week. Through a series of events taking place Feb. 3-7, the FTC and its partners will highlight signs of tax identity theft and government imposter scams, which typically involve a scammer using a victim’s Social Security number to either file a tax return and claim a refund or earn wages that are reported as the victim’s income. They will also share helpful tips for all consumers on how to protect themselves and will include tailored information for active duty service members, older adults and small businesses. Learn more.

Banks can also access turnkey materials to educate consumers on preventing identity theft and avoiding scams through the Safe Banking for Seniors program. Register for free at aba.com/seniors to receive the collection of resources. For more information, contact ABA’s Sam Kunjukunju.