What A 10% Cap on Credit Card Interest And How It Might Effect The Collection Industry

A 10% cap on credit card interest in the US would likely cut costs for many revolving cardholders but also tighten lending, reduce rewards, and shift how banks try to collect, which would reshape parts of the collections industry rather than eliminate it. The biggest effects would be on subprime portfolios, securitizations, and fee structures, with downstream changes to who gets credit, how delinquency is handled, and what gets outsourced to collectors.​

What the 10% cap proposal is

• President Trump has called for a temporary 10% cap on credit card interest rates, framed as a one‑year measure, though some bills in Congress have proposed caps of 10% for up to five years.​

• Trade groups for banks say such a cap would sharply reduce card profitability and push lenders to cut back on higher‑risk borrowers or shift them to other, more expensive products.​

Likely issuer responses

• Card issuers would lose a large slice of interest income, especially on revolvers paying 20–30% APR today, so they are expected to respond by tightening underwriting (fewer approvals, lower limits) and repricing in other ways such as higher annual fees or lower rewards.​

• Analysts warn that a 10% cap would strip out most of the “excess spread” that underpins credit‑card securitizations, which could reduce funding capacity for weaker portfolios or force repricing/segmentation.​

How credit risk and delinquencies might shift

• If access to mainstream credit cards shrinks for subprime or near‑prime consumers, more accounts may migrate to alternative credit products (store cards, BNPL, personal loans, payday‑like products), which often have different or more aggressive collection patterns.​

• For those who remain in card portfolios, lower APRs reduce finance‑charge burdens and could slightly improve cure rates for some struggling borrowers, but tighter underwriting means fewer marginal borrowers will be on the books in the first place, reducing some future delinquency volume.​

Direct implications for the collections industry

• Volume mix:

  • There may be fewer newly originated high‑risk card accounts to go delinquent, but legacy portfolios and non‑card products could generate more defaulted debt, so volumes may shift rather than disappear.​

• Pricing of portfolios:

  • Lower APRs reduce the theoretical “upside” collectors get from interest and fees on purchased portfolios, which can compress what buyers are willing to pay for charged‑off credit‑card paper and may push sellers to hold or service in‑house longer.​

• Strategy and compliance:

  • Regulators have already signaled that some collection costs (post‑charge‑off) cannot be used to justify higher penalty fees under card rules, reinforcing pressure to keep collection costs efficient and compliant, and this pressure would intensify if interest revenue is capped.​

Practical takeaways for collection agencies

• Expect more emphasis on efficiency, digital outreach, and lower‑cost contact methods as creditors seek to manage collection expenses under tighter revenue constraints.​

• Anticipate a shift in client mix: less growth in mainstream bankcard placements, more in alternative credit (installment loans, BNPL, fintech portfolios) and potentially more first‑party/early‑stage servicing mandates as issuers try to reduce roll rates earlier.​

• Prepare for continued regulatory scrutiny around fee add‑ons and cost‑recovery narratives, because policy discussions around “junk fees” and proportionality of charges are likely to stay active even as specific late‑fee rules are challenged or revised in court.​