US banks brace for profit squeeze as new rules target credit card fees and rates
US banks are facing fresh pressure as two major policy proposals threaten their profits. Share prices for JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo dropped sharply after mixed earnings reports. At the same time, lawmakers and former President Trump have pushed new rules targeting credit card fees and interest rates.
The trouble began as the four biggest US banks released their latest financial results. Citigroup’s profits fell due to losses from exiting its Russia operations. Wells Fargo’s gains missed expectations, while Bank of America reported a 2% profit dip despite higher interest income. Investors reacted by selling shares, sending bank stocks down by 5% to 7%.
The declines came as broader concerns grew over credit card regulations. Former President Trump proposed capping credit card interest rates at 10% for one year, starting January 20. A Vanderbilt University study estimated this could save consumers $100 billion annually. Meanwhile, Sen. Roger Marshall (R-KS) announced plans to introduce legislation enforcing a similar cap. Bank leaders quickly raised alarms. Bank of America CEO Brian Moynihan and Citigroup CEO Jane Fraser warned that lower interest rates could restrict credit access and reduce consumer spending. Their concerns echoed those of other industry executives, who argued the policy could harm both borrowers and the economy. Separately, Sen. Dick Durbin (D-IL) and Sen. Marshall reintroduced the Credit Card Competition Act (CCCA). The bill would force large banks to offer merchants at least two payment network options, including one outside Visa and Mastercard. If passed, the law could cut into the dominance of the two major card networks, further squeezing bank revenues. Analysts now advise investors in bank stocks to watch both the interest rate cap and the CCCA closely. The combined pressure from regulation and weak earnings has left the sector on shaky ground.
The proposed 10% interest rate cap and the Credit Card Competition Act could reshape how banks profit from credit cards. With shares already falling and executives warning of economic risks, the industry faces months of uncertainty. Investors will be tracking legislative progress alongside the next round of bank earnings reports.
