Trump's Credit Card Rate Cap: What It Means for Alternative Business Lenders

President Trump announced on January 9, 2026, via Truth Social that he is calling for a one-year 10% cap on credit card interest rates, effective January 20, 2026. The proposal sent credit-focused lender stocks into freefall, with Synchrony Financial dropping 8.7%, Bread Financial cratering 12.5%, and Capital One sliding 6-7%.¹² Major diversified banks felt the tremor too: JPMorgan Chase fell 2-3%, Citigroup dropped 3-4%, and Bank of America slid 2%.³

• Implementation Path Unclear: Trump provided no mechanism for enforcement; executive action authority is questionable, and Congressional legislation would be required for binding effect.⁴
• Bipartisan Support Exists: Senators Sanders (I-VT) and Hawley (R-MO) introduced S.381 in February 2025, which would cap rates at 10% for five years through Truth in Lending Act amendments.⁵⁶
• Industry Unified Opposition: Five banking trade groups including ABA, BPI, and CBA issued joint statements warning the cap would reduce credit availability and push consumers toward costlier alternatives.⁷
• Earnings Impact: Wells Fargo analysts estimate a 10% cap would hit large bank pre-tax earnings by 5-18% and essentially eliminate profitability for pure-play card issuers like Synchrony and Bread Financial.⁸
• BNPL Initially Rallied: Affirm and Block shares rose 2-4.5% early Monday on expectations of credit tightening driving demand to alternative payment platforms, though gains moderated.⁹

Bottom line: This proposal remains politically popular but structurally problematic. Whether it dies in committee or advances as a negotiating chip, credit tightening is already being priced in. Alternative business lenders should watch for both near-term deal flow shifts and longer-term regulatory contagion risk.

_{Sources
1 CNBC | Trump credit card rate cap enforcement path risks
2 Yahoo Finance | Credit card stocks sink after Trump proposes 10% cap
3 CNBC | Capital One drops 6%, banks hit after Trump rate cap call
4 Consumer Finance Monitor | Trump's proposed 10% cap: Key considerations
5 Congress.gov | S.381 - 10 Percent Credit Card Interest Rate Cap Act
6 Senator Sanders | Sanders, Hawley Introduce Bill Capping Rates at 10%
7 CNN Business | Trump calls for 10% cap on credit card rates
8 Bloomberg/Yahoo | Capital One, Amex shares sink on Trump threat
9 Chronicle Journal | Synchrony shares plunge 8% following proposal
10 NPR | Trump calls for 10% cap on credit card interest rates
11 PBS NewsHour | Banks balk as Trump pushes for rate cap
12 Washington Post | Banks criticize Trump's push for 10% cap
13 Axios | Credit card stocks sink after Trump proposes interest rate cap
14 Federal Reserve | 2025 Report on Employer Firms: Small Business Credit Survey
15 Federal Reserve | Financial Stability Report: Business and Household Borrowing
16 NY Fed | Household Debt and Credit Report Q3 2025
17 Kansas City Fed | Small Business Lending Survey Q4 2024
18 CFPB | Consumer Use of Buy Now, Pay Later Report 2025
19 Richmond Fed | Buy Now, Pay Later: Market Impact and Policy Considerations
20 OCC | Risk Management of Buy Now, Pay Later Lending Bulletin
21 TechCrunch | BNPL is expanding fast, and that should worry everyone
22 Canopy | State of Small Business Lending Statistics 2025
23 Clearly Acquired | Non-Bank Lending Trends in SMB Acquisitions 2025
24 NerdWallet | What Is a Merchant Cash Advance (MCA)?
25 Bloomberg Law | State Regulatory Landscape Shifts for Commercial Lenders
26 Business Debt Counsel | State-by-State Guide to MCA Lender Crackdowns
27 Consumer Financial Services Law Monitor | Senators Propose 10% Rate Cap Legislation
28 Neubert, Pepe & Monteith | MCAs Are Not Loans and Not Subject to Usury Laws
29 Global Fintech Blog | NY AG Secures $1 Billion Judgment for Illegal MCA Loans
30 Onyx IQ | Commercial Financing Disclosure Laws by State}

What Alternative Business Lenders Need to Know

How Will Bank Credit Tightening Affect Your Deal Flow?

The proposal's primary mechanism for affecting alternative lenders isn't direct regulation—it's displacement. When banks cannot profitably underwrite credit at 10% APR, they exit segments. The Electronic Payments Coalition estimates up to 88% of current credit card accounts could be closed or severely restricted under a binding cap.⁹ That's not hyperbole—it's math. The average credit card APR sits at 22-24%.¹⁰ A 10% ceiling eliminates the risk premium that makes subprime and near-prime revolving credit viable.

For MCA operators, factoring shops, and short-term business lenders, this creates a potential referral surge. Small business owners who currently fund working capital gaps through business credit cards—and 61% of small business owners use personal cards for business expenses¹⁴—would suddenly find that channel constrained. The Fed's Small Business Credit Survey shows 39% of firms carry more than $100,000 in outstanding debt, with operating expenses (56%) and expansion capital (46%) as primary financing drivers.¹⁵ When cards tighten, that demand shifts sideways.

The shift isn't theoretical. February 2025 NFIB data shows the share of small firms borrowing regularly has already fallen to its lowest level since May 2022.¹⁶ Banks have tightened credit standards for 13 consecutive quarters.¹⁷ A rate cap would accelerate that tightening dramatically, particularly for the 700-and-below FICO segment that represents the core customer base for most alternative business lenders.

Will This Cap Your Factor Rates? Understanding the Regulatory Firewall

Here's what matters: the proposed cap targets credit cards, not commercial financing broadly. MCAs, factoring, and revenue-based financing remain structurally distinct from consumer credit products—and courts have consistently upheld that distinction. The core legal reasoning: if repayment is contingent on business performance rather than absolutely required, it's a purchase of future receivables, not a loan subject to usury.²⁸

Recent case law reinforces this firewall. In 2024, multiple New York courts reaffirmed that absent an unconditional repayment obligation, MCA agreements constitute purchases of future receivables, not loans.²⁸

The three-factor test remains:

1. Presence of reconciliation provisions
2. Finite versus indefinite payment terms
3. Recourse upon bankruptcy.

Properly structured deals with genuine reconciliation rights and no absolute repayment guarantees fall outside usury frameworks.

That said, regulatory spillover risk is real. States have increasingly moved toward commercial financing disclosure requirements that mirror consumer protections. California, Connecticut, New York, and several others now mandate TILA-style disclosures including APR calculations for MCAs under $250,000-$500,000.³⁰ Missouri's new disclosure law took effect February 2025. The momentum is clear: even without direct rate caps, transparency requirements are tightening the operational environment for high-cost commercial financing.

Where Are State Attorneys General Drawing Lines?

The New York Attorney General's $1+ billion judgment against Yellowstone Capital in early 2025 signals intensified enforcement focus on MCA operators who cross the loan/purchase line.²⁹ The AG's theory: fixed daily debits from bank accounts, no genuine reconciliation, and implied APRs reaching 820% transformed purported MCAs into criminally usurious loans. The settlement canceled $534 million in outstanding balances and banned Yellowstone from the industry entirely.

State enforcement is accelerating across jurisdictions.

• California's 2024 attorney general fines topped $100 million against MCA operators.
• Massachusetts has successfully labeled MCAs with double-digit factor rates as usurious loans.
• Michigan issued two cease-and-desist orders against MCA lenders in 2025.
• Delaware's Division of Banking launched two major enforcement actions this year.²⁶

The pattern is unmistakable: regulators are scrutinizing deal structures for substance over form.

For compliant operators, this enforcement activity may actually help by clearing predatory competitors and legitimizing the industry. The key differentiators remain consistent: genuine reconciliation rights exercised in practice, realistic underwriting tied to receivables rather than just credit scores, and transparent disclosure of total costs. Operators who run their books like de facto consumer lenders while claiming MCA treatment face mounting legal exposure.

Is BNPL the Real Competitive Threat Here?

The Monday stock rally in Affirm and Block reflected a simple thesis: if banks exit consumer credit, BNPL absorbs demand. That logic extends to business financing. BNPL providers are increasingly targeting small business purchases, and the payment infrastructure they've built—instant approval, checkout integration, soft-pull underwriting—creates a compelling user experience that traditional MCA operators struggle to match.

But BNPL has its own problems. January 2025 CFPB data shows 63% of BNPL borrowers carried multiple simultaneous loans, with 20% originating more than one loan monthly.¹⁸ Nearly two-thirds of BNPL users have subprime or deep subprime credit.²¹ Default rates are accelerating: 42% of BNPL users made at least one late payment in 2025, up from 34% in 2023.²¹ This is phantom debt that doesn't report to credit bureaus—other lenders are flying blind.

The Richmond Fed's January 2025 analysis frames BNPL delinquency as moderate relative to traditional products—under 2% at major providers versus 8.8% transition rates for credit cards.¹⁹ But that data lags reality. Klarna's Q1 2025 credit losses rose 17% year-over-year.²¹ The OCC's bulletin on BNPL risk management explicitly warns about loan stacking, inadequate affordability checks, and consumer protection gaps.²⁰

For alternative business lenders, BNPL represents both competition and cautionary tale. The technology stack is compelling; the credit quality isn't. Operators with strong underwriting discipline should emphasize that differentiation as BNPL's quality problems become more visible.

Which Borrower Segments Will Move—And Which Won't?

The displacement from bank credit tightening won't be uniform. Expect the strongest flow into alternative products from:

1. Retailers and restaurants with high transaction volumes but seasonal revenue variability
2. Service businesses with predictable receivables but thin margins that banks view as high-risk
3. Second-stage businesses that exhausted their initial credit card runway but don't qualify for traditional term financing.

The non-bank lending market has already captured significant share. By 2025, alternative lenders control 40% of middle-market lending, up from 20% in 2018.²³ Seventy-two percent of small businesses seeking credit now approach non-bank lenders.²³ The digital lending market is projected to hit $20.5 billion by 2026, roughly double its 2021 value.²² A credit card rate cap accelerates these secular trends.

Segments that won't move: prime-and-above businesses with existing bank relationships, asset-rich firms that qualify for secured financing, and high-revenue companies that can access SBA or conventional term loans. The opportunity concentration remains in the 550-700 credit band with monthly revenues of $7,500-$100,000—exactly where most MCA and short-term business lenders already operate.

Our Opinion

This proposal is politically potent and economically incoherent. A 10% rate cap on credit cards is below the cost of capital for most unsecured consumer lending. Banks won't operate unprofitable products—they'll exit segments, cut lines, and eliminate rewards programs. The industry's response is not a negotiating position; it's arithmetic.

For alternative business lenders, that's opportunity dressed as chaos. Every credit line canceled by a nervous bank creates a business owner searching for working capital. The MCA industry built its entire customer acquisition model on reaching borrowers that banks declined. A credit card rate cap—whether implemented or merely threatened—expands that addressable market substantially.

But don't celebrate yet. The same populist impulse driving this proposal doesn't distinguish cleanly between consumer and commercial products. Factor rates of 1.3-1.5 look a lot like the APRs that politicians want to cap. The regulatory firewall protecting MCAs and factoring from usury treatment depends on deal structures that courts scrutinize carefully—and that state AGs are increasingly willing to challenge. New York's billion-dollar Yellowstone judgment is a warning shot.

The operators who will win through this cycle are those who maintain genuine product differentiation from consumer credit, invest in compliance infrastructure before it becomes mandatory, and resist the temptation to chase marginal deals that tightening banks correctly declined. The demand shift is coming. Make sure you're positioned to serve it profitably and sustainably.

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