JPMorgan Says ‘Everything’ on Table to Fight 10% Credit Card Cap

JPMorgan Chase & Co. warned that President Donald Trump’s call for a 10% cap on credit card rates threatens to “significantly change” its business and would harm the biggest US bank and customers.

“If it were to happen, it would be very bad for consumers, very bad for the economy,” Chief Financial Officer Jeremy Barnum said Tuesday on a call after the bank reported fourth-quarter results. Under that type of scenario the card operation “would be a business that we would have to significantly change.”

The bank declined to quantify the exact impact, with Barnum noting that there’s “way too much” uncertainty about the proposal. Barnum warned that “everything is on the table” in pushing back against what he called “weakly supported directives to radically change our business.”

On Friday, President Donald Trump called for a one-year cap of 10% on credit-card rates, targeting a key business for the financial industry. He doubled down on that threat later on, saying firms not complying with it by his Jan. 20 deadline would be “in violation of the law.”

The potential cap pushed bank shares down Monday. Shares of JPMorgan, the second-largest US card issuer, fell 1.4% that day, while the stock of the largest issuer, Capital One Financial Corp., dropped 6.4%.

Trump took his fight against the card industry one step further on Tuesday, when he called on lawmakers in a social media post to support legislation known as the Credit Card Competition Act. The bipartisan measure would require larger banks to offer retailers the ability to bypass dominant networks Visa Inc. and Mastercard Inc. for transactions, taking direct aim at what has been a lucrative business model.

Shares of Visa and Mastercard slumped as much as 5.6% and 5.8%, respectively, making them two of the worst performers in the S&P 500 Index on Tuesday.

“Political winds appear to be shifting, making short-term fintech investing challenging,” Andrew Jeffrey, an analyst at William Blair, said in a note to clients. Visa and Mastercard “would almost certainly take at least a transitory financial hit” if the legislation were to advance, he said.

‘Devastating’ Impact

Credit cards are major business for JPMorgan. Such loans totaled $247.8 billion at the end of December. In total, the bank’s card-services and auto business generated about $7.28 billion in revenue during the fourth quarter.

JPMorgan reported a net revenue increase of 5% in the bank’s card services and auto business in the last three months of the year. That jump was driven by net interest income on higher revolving balances – a metric that could take a hit if Trump’s threats to cap credit-card interest rates is implemented.

Industry groups including the Bank Policy Institute and Consumer Bankers Association have said they share the president’s goal of getting more affordable credit, but said a interest rate cap would be “devastating” for some consumers.

“Evidence shows that a 10% interest rate cap would reduce credit availability and be devastating for millions of American families and small business owners who rely on and value their credit cards, the very consumers this proposal intends to help,” the groups said in a joint statement late Friday.

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