The chief executive of the ‘buy now, pay later’ lender, which wants to lure customers from big banks, says the move will make the market more competitive
Sebastian Siemiatkowski, the chief executive of Klarna, the “buy now, pay later” lender, said it is unfair for wealthy American consumers to benefit from credit card reward programmes as a result of low-income households paying high interest rates on their debt.
Siemiatkowski, 44, defended President Trump’s plan to introduce a 10 per cent cap on US credit card interest rates on Sunday, after critics said they feared it would result in fewer credit card rewards for wealthier consumers.
He said: “People can have tons of opinions about it, and they can be frustrated about their [credit card purchasing reward] points, but generally speaking, it’s not a fair system.
“I personally don’t think it’s a great system that I’m going to get better rewards because somebody else is being lured into revolving at 30 per cent.”
Trump unveiled plans last week to introduce a one-year 10 per cent cap on credit card interest rate fees on January 20, pledging to “no longer let the American public be ‘ripped off’ by credit card companies”.
The average credit-card interest rate in the US is 19.7 per cent, while store credit cards charge an average rate of 30.1 per cent, according to Bankrate.
Klarna, which listed in New York last year, allows shoppers to make purchases and pay in monthly installments, spread out over up to 24 months, with no interest fees or late charges if customers pay on time.
The firm wants to lure customers from big banks. More than 1 million people have signed up to use its debit card in the US, which combines everyday spending with its “buy now, pay later” features.
An interest rate cap will mean “that all the banks who currently are making excess profits on consumers due to over indebting themselves on revolving credit cards will not be able to do so to the same degree, which makes the market more competitive”, Siemiatkowski said.
US banking advocacy groups said last week in a joint statement that a 10 per cent interest rate cap would “reduce credit availability” and “only drive consumers toward less regulated, more costly alternatives.”
Bill Ackman, the billionaire fund manager who endorsed Trump in the last elections, said on X the US president’s call was a “mistake.”
He said: “Consumers denied credit cards will be forced to turn to loan sharks whose rates and terms will be vastly worse for borrowers. While 20 per cent or more is a high rate, loan sharks can charge multiples of these rates, and the cost of default can be physical harm or worse.”
Siemiatkowski said: “In all the markets that Klarna is active in, which is a lot that have interest rate caps, I haven’t really seen these effects that people are saying are going to happen. They’re like, ‘Oh, people with low income, or people with low credit scores are … going to loan sharks and so forth. It just doesn’t happen. If you don’t have access, you don’t have access.
“People will argue, capitalism is great, and hence everything will regulate itself by competition. That’s not true, right? Like, we don’t want anarchy. Anarchy is a world where, like, everyone can do what the hell they want, and that ends up not working particularly well either, right?”
Lawmakers from the Democratic and Republican Parties have raised concerns about high rates and have called for those to be addressed.
Trump did not outline how he would enforce the rate cap. The proposal comes as the president seeks to reassure voters that he is addressing cost of living concerns ahead of the November midterm elections.
Prior to Trump’s announcement on Friday, Senator Bernie Sanders, a Vermont independent, said on X: “Trump promised to cap credit card interest rates at 10 per cent and stop Wall Street from getting away with murder. Instead, he deregulated big banks charging up to 30 per cent interest on credit cards.”
