The Klarna CEO supports Trump’s 10% cap on credit cards, criticizing the rewards as being based on the debt of poorer borrowers.

• Klarna CEO supports Trump’s one-year plan to cap credit card interest rates.

• According to Sebastian Siemiatkowski, high rates lock low-income borrowers into costly debt.

• He says credit card rewards primarily benefit wealthier consumers.

Klarna CEO Sebastian Siemiatkowski has expressed support for President Donald Trump’s call to cap U.S. credit card interest rates at 10% for one year.

“I think Trump is being wise here and proposing something that makes a lot of sense,” Siemiatkowski told CNBC on Monday.

Siemiatkowski said traditional credit cards are designed to push consumers to place most or all of their spending on credit and carry large balances at high interest rates. This structure, he explained, incentivizes people to borrow as much as possible and leads to higher losses, especially among lower-income borrowers.

“Capitalism is great, but anarchy is not,” Siemiatkowski said, arguing that some limits are necessary to protect consumers.

While some critics argue that buy now, pay later services can still encourage overspending, Siemiatkowski said Klarna is built around small purchases with fixed, interest-free payments.

He added that Klarna approves purchases in real time based on the customer’s current purchasing behavior, rather than revenue data which may be out of date. This approach, he said, leads customers to borrow less and fall behind on payments less often.

In another interview with CNN, Siemiatkowski criticized credit card rewards programs such as cash back and airline miles, saying they primarily benefit wealthier consumers while lower-income borrowers bear more of the costs.

Even people who don’t use credit cards, he says, pay more for everyday goods because merchants raise prices to cover card fees, while wealthier shoppers get that money back in rewards.

“This is the most effective income redistribution program in the world,” Siemiatkowski told CNN.

Trump’s call this weekend to cap interest rates for a year sparked a liquidation of the main financial stocks Monday, including Capital One, Synchrony Financial, JPMorgan and Citigroup.

Analysts at UBS and Goldman Sachs have warned that a 10% cap on credit card interest rates could have the opposite effect, as lenders would reduce the supply of credit, making it harder for some consumers to borrow.

But there could also be winners.

SoFi CEO Anthony Noto said Saturday the proposal could push consumers away from credit cards and toward personal loans.

Read the original article on Business Insider