Senate Passes Bill To Restrict Unfair Credit Card Practices

The Senate voted overwhelmingly on Tuesday to put new restrictions on the credit card industry, passing a bill whose backers say will make card-issuers spell out their terms in fewer words, using plain English, and treat customers more fairly.

The 90-to-5 vote, following a 357-to-70 vote in the House on April 30, made it likely that President Obama will have a measure on his desk before the Memorial Day recess. The differences between the House and Senate versions will have to be worked out, but given the political atmosphere it seems likely that the House-Senate negotiations will move quickly.

"We stood up for consumers and stood up to abusive credit card companies," Senator Harry Reid of Nevada, the Democratic majority leader, said after the vote. "We said that big banks can no longer take advantage of hardworking Americans. We demanded that when Americans use a credit card -- as almost everyone does almost every day -- they no longer have to fear that they'll be abused."

The industry has asserted that the legislation may backfire, forcing banks to issue fewer credit cards at greater cost to the current cardholders and making credit harder to get at a time when many Americans need it.

Edward L. Yingling, president and chief executive of the American Bankers Association, said the bill passed on Tuesday contained provisions that were "tough, but workable."

"It also, unfortunately, contains some provisions that will undermine the availability of credit," Mr. Yingling said. "Credit cards are a strong economic driver and are relied upon by consumers and small businesses to make payments and to bridge short-term financial gaps."

Most importantly, he said, "this bill fundamentally changes the entire business model of credit cards by restricting the ability to price credit for risk."

But the tide has been running against the banking and credit card industry, with many consumers mired in debt and the public angered by the bailout of financial firms and by reports of large executive pay packages.

"Any effort to restore confidence in our economy must start not on Wall Street but in Main Street, and that's what the credit card situation is all about," Mr. Reid said before Tuesday's vote.

Senator Christopher J. Dodd, the Connecticut Democrat who heads the Senate Banking Committee, said the bill became a reality because of cooperation from Senator Richard C. Shelby of Alabama, the panel's ranking Republican, and many other lawmakers on both sides.

President Obama has spoken derisively of the multi-page, fine-print statements familiar to millions of credit card-users. Last week, he told a receptive crowd in New Mexico that "you should not have to worry that when you sign up for a credit card, you're signing away all your rights. You shouldn't need a magnifying glass or a law degree to read the fine print that sometimes doesn't even appear to be written in English."

Senator John Kerry of Massachusetts, a senior Democrat on the finance and commerce committees, said, "We've got too many hard-working families in Massachusetts struggling to keep their heads above water, and the last thing they need is to get whacked with unfair credit card fees."

Among other things, the Senate measure would prohibit companies from raising interest rates on existing balances unless a card holder was 60 days behind, and then it would require the rate to be restored to its previous level if payments were on time for six months. Consumers would have to be notified of rate increases 45 days in advance. And companies could not charge a late fee if they were late processing a payment.

Statements would have to be mailed 21 days before a payment was due. It would be harder for companies to issue cards to people under age 21. Rates could not be increased within the first year, and promotional rates would be in force for at least six months.

Credit card debt has increased by 25 percent in the last decade, with delinquency rates up by more than a third since 2006, according to statistics cited by the White House. Americans pay $15 billion in penalty fees a year, accounting for about 10 percent of the industry's revenues. About a fifth of those carrying credit card debt pay more than 20 percent in interest.

One amendment attached to the Senate bill by Senator Tom Coburn, Republican of Oklahoma, would restore a Bush administration policy allowing loaded guns in national parks. That provision is not in the House version, so there may be discussions between the two chambers over the issue.

Voting against the Senate measure on Tuesday were Lamar Alexander of Tennessee, Robert Bennett of Utah, Jon Kyl of Arizona and John Thune of South Dakota, all Republicans, and one Democrat, Tim Johnson of South Dakota. (The credit card industry accounts for thousands of jobs in South Dakota.)

Before Tuesday's vote, the senators applauded their colleague Carl Levin, Democrat of Michigan, who cast the 11,000th vote of his Senate career. "I couldn't think of a better bill to cast this 11,000th vote on," Mr. Levin said.

Carl Hulse and Peter Baker contributed reporting.