Trump's 10% Interest Rate Cap On Credit Cards Will 'Likely Bring On A Recession,' Says Capital One CEO: $6 Trillion Consumer Spending At Stake

Capital One Financial Corp. (NYSE:COF) CEO Richard Fairbank issued a stark informing astir the imaginable consequences of President Donald Trump’s projected 10% headdress connected recognition paper involvement rates, saying the determination could severely restrict user entree to recognition and destabilize the broader economy.

During the company’s fourth-quarter net telephone connected Thursday, Fairbank argued that “putting a terms power successful place” volition not marque recognition much affordable, but would alternatively marque recognition “less disposable for consumers, up and down the recognition spectrum.”

“This is acold much than a subprime issue,” helium said, adding that banks would beryllium “compelled to instantly slash recognition lines, restrict accounts, and bounds caller originations to a precise tiny subset of consumers.”

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Fairbank pointed to the outsized relation that user recognition plays successful the U.S. economy. “Consumers are the backbone of the American economy,” helium said, noting that 70% of the country’s GDP is driven by user spending and “$6 trillion of that spending is connected recognition cards.”

He warned that a “material contraction successful disposable recognition would apt origin shocks passim the economy,” arguing that the resulting pullback successful spending “would apt bring connected a recession.”

Fairbank besides cited broader consequences, including risks to retailers, airlines, and hotels babelike connected paper programs. “Credit cards are galore consumers’ archetypal introduction constituent into gathering a recognition history,” helium said. “For galore consumers, a recognition paper is their lone entree to credit.”

“We consciousness powerfully that a headdress connected involvement rates would catalyze a fig of unintended consequences,” Fairfield concluded by saying.

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According to analysts, Capital One is among the “most vulnerable” to caps connected involvement rates, fixed its dense reliance connected revolving recognition paper balances and nett involvement income.

The institution reported $279.6 cardinal successful period-end recognition paper loans, which accounts for the largest stock of its full indebtedness portfolio astatine $453.6 billion.

Fairbank’s warnings travel respective different economists and manufacture experts who person warned against Trump’s involvement complaint caps connected recognition cards.