The Senate today overwhelmingly passed a bill that would sharply curtail credit card issuers’ ability to raise interest rates and charge fees, taking a critical step in reforming an industry that has gone largely unregulated for decades.

In a 90-5 vote, The Senate delivered a victory to consumer groups and to the White House, who blame industry practices for sending Americans deeper into debt just as they are losing their jobs and their homes.

Lawmakers will now turn to reconciling differences with a similar bill passed by the House on April 30. President Obama has said he wants to sign a bill into law by Memorial Day.

Consumer advocates said the Senate’s action showed a solid commitment to consumer protection.

“This is landmark legislation that is going to make the credit card marketplace more transparent and more fair for millions of consumers,” said Travis B. Plunkett, legislative director for the Consumer Federation of American. “In particular, it’s going to prevent credit card companies from suddenly and unjustly increasing interest rates which is pushing many consumers with credit card debt into bankruptcy.”

Congress stepped up efforts to pass legislation in recent weeks, as several card companies increased interest rates and cut limits on both delinquent and credit-worthy customers. Outraged consumers complained that they were being mistreated by the same companies that were receiving federal bailout money. The Obama administration listened and stepped into the fray, meeting with credit card executives at the White House and stipulating provisions they wanted to see in legislation.

Industry representatives have argued that any legislation would result in more lost revenue and force them to raise interest rates and withhold credit.

“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,” said Edward L. Yingling, president and chief executive of the American Bankers Association. “The goal in the legislation should be to obtain the right balance: providing protections, while maintaining the important role of credit cards in providing loans to consumers and small businesses. Unfortunately, we believe the bill does not achieve that balance and will therefore cause an unnecessary decrease in credit availability.”

Analysts and lawmakers said the chances of a swift compromise were high because the issue has such populist appeal. Even Republicans who had vehemently opposed reform made critical concessions. The House will now either approve the Senate bill or the legislators will have to agree on a version to send to Obama.

The Senate bill allows rate hikes only if the borrowers’ payment was past due 60 days. Card companies would have to restore the original rate if the customer paid on time for the next six months.

The House bill, authored by Rep. Carolyn B. Maloney (D-N.Y.), largely mirrors regulations passed by the Federal Reserve in December that also would ban so-called “unfair and deceptive” practices. It is not considered as strong as the Senate bill.

The Federal Reserve’s new rules do not go into effect until July 2010. Both the House and Senate bills seek to accelerate that timeline. The Senate bill would be enacted nine months after signing and the House bill 12 months after.

(Source: Washington Post)