Ayanna Khan-Flowers is the president and founder of the Delaware Black Chamber of Commerce.
Over the last several years, I’ve had the privilege of helping grow the Delaware Black Chamber of Commerce into a leading organization for entrepreneurs and small businesses across our state. Now, I’m taking the same lessons I learned there and working to apply them more broadly, as I campaign for the 9th District seat in the Delaware House of Representatives.
My goal, whether at the chamber or, hopefully, in the state House, is to ensure economic opportunity for all. That means small-business and entrepreneurship opportunities, new jobs from those new businesses and economic growth. It also means that working families can have a shot at achieving their unique versions of the American dream.
Delaware can be one of the best places in the country for economic opportunity, but that means prioritizing policy that focuses on the needs of residents. A good place to start is by preserving access to credit.
Doing so requires our federal delegation in Washington to reject proposals to cap credit card interest rates. Rate caps would overlook the realities of many Delaware families and entrepreneurs, plus make their lives more difficult.
While there have been various proposals to implement rate caps, the favored approach by many, including President Donald Trump, is a 10% cap. But this approach ignores the realities of how credit works.
Higher interest rates currently enable high-risk borrowers to access credit. Borrowers with low credit scores — because of thin credit histories or missed payments — represent a greater risk of default. A higher interest rate is how a lender balances that risk, while still extending the loan.
A 10% cap wouldn’t protect these borrowers from higher rates or reduce the financial burden of debt. It would bar them from the lending system entirely. Instead of offering credit at the capped rate, lenders would stop lending to them.
The Federal Reserve Bank of New York found that this is exactly what happened in several states that adopted a cap of 36%. The most high-risk borrowers, who typically need credit access the most, had that access greatly reduced. At the same time, their financial situations didn’t improve.
Lower the cap to 10%, as Trump and others proposed, and the impact is even more widespread. Borrowers across the spectrum will see their access reduced. About 164 million borrowers would see a reduction in access. That equates to more than three-quarters of all existing cardholders.
This would particularly impact entrepreneurs and residents of color. Black and Hispanic Americans often have lower credit scores. Fifty-four percent of Black Americans report no score or a score below 640, while 41% of Hispanic Americans report the same. A universal cap would disproportionately lock these borrowers out, cutting off both their access to credit and their opportunities to build credit histories.
Beyond that, the need for credit doesn’t disappear. Locking these communities out of credit cards will force them down more harmful paths, such as payday lenders or other unregulated sources. All told, their borrowing costs will be higher and the credit far more dangerous.
Entrepreneurship would be hit the same way. Nearly 90% of small businesses rely on their owners’ personal credit scores to secure financing. In many cases, good scores start with responsible use of credit cards. Rate caps would limit access to credit that entrepreneurs, particularly those of color, rely on to open new businesses that create jobs and strengthen our economy.
We must avoid any caps that cut off access to the formal credit system for our communities. We need to ensure that these communities can access the credit cards that allow them to run businesses, to pay for emergencies or to bridge cash flow gaps.
That is the way to guarantee economic opportunity and growth.
Reader reactions, pro or con, are welcomed at civiltalk@iniusa.org.
