Affirm's 6.61% Plunge Amid Skepticism Over Trump's Credit Cap Proposal as Volume Surges to 127th Rank

Market Snapshot

Affirm Holdings (AFRM) closed 2026-01-12 with a 6.61% decline, marking a sharp reversal from its pre-market performance, which had surged as much as 5% following U.S. President Donald Trump’s proposal to impose a 10% cap on credit card interest rates. Trading volume spiked to $0.89 billion, a 311.8% increase from the prior day, ranking it 127th in market activity. Despite the initial optimism, the stock’s final decline reflected growing skepticism about the proposal’s feasibility, as analysts highlighted legislative and operational hurdles. The mixed performance underscored the market’s tension between short-term speculative enthusiasm and long-term uncertainty.

Key Drivers

Trump’s Credit Card Rate Proposal and Market Reallocation

President Trump’s announcement of a temporary 10% cap on credit card interest rates, effective January 20, triggered an immediate shift in investor sentiment. The proposal, posted on Truth Social, framed as a response to “unreasonably high” APRs (typically 20–30%), spurred a rotation of capital toward buy-now-pay-later (BNPL) providers and personal loan platforms, including Affirm. Mizuho analyst Dan Dolev highlighted that such a policy could “reshape the lending landscape,” directly benefiting companies like AFRM, UPST, SOFI, and PYPL by redirecting consumers with lower credit scores toward alternative lenders. Traditional banks, including JPMorgan Chase (-3%) and American Express (-4.8%), faced immediate selling pressure, as investors anticipated tighter underwriting standards and reduced credit availability under the proposed cap.

Legislative and Operational Challenges

While the proposal initially boosted Affirm’s stock, analysts emphasized its limited practicality. Evercore ISI’s Sarah Bianchi noted that implementing a nationwide cap would require new legislation, as the National Bank Act currently allows credit card rates to vary by state. Additionally, critics like JPMorgan’s Vivek Juneja argued that executive action alone cannot enforce such a policy, labeling the proposal “dead on arrival.” The Federal Reserve’s data on $1.23 trillion in U.S. credit card debt and the New York Fed’s analysis of 50% of consumers having FICO scores below 745 underscored the scale of potential disruption. However, the lack of a clear enforcement mechanism left investors wary, contributing to Affirm’s intraday volatility and eventual decline.

Fintech Exposure and Risk Dynamics

Affirm’s business model, which relies entirely on consumer credit—primarily BNPL loans—positioned it as a potential beneficiary of the proposed cap. Mizuho estimated that 10% of U.S. consumers with lower credit scores might shift to BNPL providers if banks tighten lending. However, the same analysts cautioned that this shift could exacerbate risk for fintechs. If economic conditions weaken or delinquency rates rise, the influx of lower-credit borrowers could strain Affirm’s underwriting models. This duality—opportunity for volume growth versus increased credit risk—created a tug-of-war in market sentiment. By session’s end, investors appeared to prioritize the latter, as evidenced by Affirm’s 6.61% drop despite earlier gains.

Contrasting Analyst Perspectives

The market’s mixed reaction reflected diverging analyst views. Mizuho’s Dolev remained bullish, emphasizing that the proposal could unlock “meaningful volume growth” for fintechs. Conversely, Evercore’s Bianchi and Wells Fargo analysts underscored the policy’s impracticality, noting that banks might respond by reducing credit lines or shifting risk to less regulated alternatives. The latter perspective gained traction as the day progressed, with Jefferies analysts calling the proposal a “headline play” and Reuters reporting that major banking groups warned of reduced credit availability. This analytical split left Affirm’s stock vulnerable to rapid reversals, as investors recalibrated expectations.

Earnings and Policy Timeline Uncertainty

The timing of the proposal—just days before Affirm’s scheduled earnings report on February 5—added to the uncertainty. While the company’s Q4 performance could provide insights into its credit trends and risk management, the market’s focus remained on the broader policy implications. Additionally, the absence of concrete legislative action or White House follow-through left investors in a holding pattern. As one Stocktwits user noted, the “extremely bullish” retail sentiment around SOFI and AFRM contrasted with institutional skepticism, highlighting the fragmented nature of market expectations. For now, Affirm’s stock appears to be trading on speculative momentum rather than fundamental clarity.