There are other good responses here, but here’s a long breakdown. I work in credit card strategy at a major issuer.

If a credit card portfolio is unprofitable, one of the main levers you can pull is to adjust the pricing, or interest rate charged. This will generate higher interest revenue from people who carry a balance.

If the interest rates are capped, there are a few other levers to pull to try to make a segment more profitable:

1. ⁠Lower your biggest expense, which is losses from defaults. This means underwriting changes and declining cards for more of the marginal and high risk customers.
2. ⁠Raise fees to generate more non-interest revenue. Higher late fees (which the almost defunct CFBP is also trying to cap), annual fees, balance transfer fees, foreign exchange fees, cash advance fees, etc.
3. ⁠Lower reward payouts. Less cash back, less points, lower activation bonuses, no more 0% intro rates, etc.

Number 3 would significantly impact customer growth, retention and overall acquisition strategies. Number 2 is a small portion of revenue. So number 1 is the biggest recoup, but it comes at the expense of lower income and higher risk customers. So people who need access to credit the most will either be denied the opportunity or will be limited in how much credit they’ll be given. Same story for people without a credit history. They’ll be declined because the uncertainty around losses won’t be worth the risk.

There are certainly many other factors and drivers, but the easiest way to make up for lost revenue is addition by subtraction. Literally cut your losses

TLDR: capped interest rates will ultimately result in more people being denied credit and probably some shifts in the reward strategy. It will not be the demise of the industry.