The Trump-Driven Credit Card Rate Cap and Its Implications for Buy Now, Pay Later (BNPL) Firms Like Affirm and SoFi

The Trump administration's proposed 10% cap on credit card interest rates-announced in January 2026-has ignited a seismic shift in the financial sector, with profound implications for both traditional credit card lenders and buy-now-pay-later (BNPL) platforms. This regulatory disruption, framed as a consumer protection measure, threatens to reshape the lending landscape by curbing high-interest rates (which currently average 20–30%) while potentially accelerating the rise of alternative financing models. For investors, the policy's ripple effects hinge on two critical dynamics: the erosion of profitability for legacy banks and the structural tailwinds for BNPL firms like Affirm and SoFi.

Regulatory Disruption and Sector Reallocation

The proposed cap, which would limit APRs to 10% for one year, has already triggered a sharp sell-off in major credit card issuers such as Capital One and JPMorgan Chase. Analysts estimate that a 10% cap could reduce net interest income for large banks by 5–18%, particularly for institutions reliant on credit card revenue. This aligns with broader Trump administration deregulatory tendencies, exemplified by the revocation of a 2025 rule capping late fees at $8. However, the administration's enforcement mechanism remains unclear, raising legal questions about whether the cap could be implemented via executive action or requires congressional legislation (such as the stalled S.381 bill).

For BNPL platforms, the policy creates a paradoxical opportunity. While the cap itself does not directly regulate BNPL services, it could force traditional lenders to tighten credit standards to offset reduced margins. This, in turn, may push high-risk borrowers-those with lower credit scores-toward alternative lenders. Mizuho analyst Dan Dolev notes that Affirm and SoFi could benefit from this shift, as their business models cater to consumers excluded from traditional credit markets. The BNPL sector, which grew to $1.2 trillion in credit card balances in Q3 2025, is positioned to capture market share if consumers increasingly favor installment plans or personal loans over high-interest credit cards.

Industry Responses and Analyst Projections

The American Bankers Association has warned that the cap could reduce credit availability and drive borrowers to "less regulated, more costly alternatives," a critique that indirectly validates the potential for BNPL growth. Meanwhile, fintech analysts argue that the policy could accelerate structural changes in consumer lending. For instance, Raymond James analysts highlight that BNPL platforms might see increased volume as traditional lenders retreat from subprime segments. This aligns with historical trends: during the 2020 pandemic, BNPL adoption surged as credit card rates spiked, suggesting a precedent for sector reallocation under regulatory stress.

Despite these tailwinds, BNPL firms face their own risks. A 10% cap could lead to a "credit contraction", where lenders reduce exposure to high-risk borrowers, potentially limiting BNPL growth if consumer demand for installment products wanes. However, given the current political climate-marked by bipartisan support for S.381-and Trump's vocal advocacy, the policy's long-term trajectory appears more certain than its immediate implementation.

Strategic Implications for Investors

For investors, the key question is whether the BNPL sector can scale profitably amid regulatory uncertainty. While Affirm and SoFi have not issued formal statements on the cap, third-party analysis suggests their business models are structurally aligned with the policy's potential outcomes. Mizuho's Dolev estimates that BNPL platforms could see a 10–15% increase in transaction volumes if traditional credit card usage declines. This would be particularly impactful for Affirm, whose revenue is tied to merchant fees rather than direct interest income, and for SoFi, which offers personal loans at rates below the current credit card average.

Conversely, traditional banks face a more precarious outlook. A 10% cap could force them to either absorb losses or innovate in alternative revenue streams. However, given the industry's lobbying power and the legal ambiguities surrounding the proposal, investors should brace for volatility. The Trump administration's deregulatory moves-such as the late-fee rollback-suggest a preference for favoring financial institutions, complicating the cap's enforcement.

Conclusion

The Trump-driven credit card rate cap represents a pivotal regulatory experiment with far-reaching consequences. While its immediate impact remains uncertain, the policy's long-term implications are clear: a potential reallocation of credit demand from traditional banks to BNPL platforms. For Affirm and SoFi, this creates a strategic inflection point-one where their ability to scale responsibly in a fragmented lending market will determine their success. Investors, meanwhile, must weigh the sector's growth potential against the risks of regulatory overreach and market contraction. As the debate unfolds, the interplay between policy and innovation will define the next chapter of consumer finance.