May 18, 2010, 12:29 AM EDT

May 18 (Bloomberg) -- Credit-card firms caught off-guard by U.S. Senate passage of curbs on debit fees last week may be forced to abide by state limits on interest rates under another amendment to the financial overhaul bill.

Sheldon Whitehouse, a Rhode Island Democrat, told reporters yesterday the U.S. should restore the ability of states to protect their citizens from high interest rates, regardless of where the lender is located. Whitehouse spoke on the Senate floor on behalf of his amendment, which he has said is supported by Richard Durbin of Illinois, the majority whip, and Republican Thad Cochran of Mississippi.

“It has bipartisan appeal,” Whitehouse told reporters before taking his arguments to the Senate floor. “I don’t see any reason why somebody in Mississippi or Idaho is any less screwed by an out-of-state bank gouging them 30-plus percent interest rates than somebody in Rhode Island or Illinois.”

The payments industry is still reeling from the Senate’s surprise passage last week of limits on “swipe” fees, the levy charged to merchants on each debit-card transaction. Durbin helped push that measure, which may crimp revenue at Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co., the biggest U.S. debit-card issuers.

“Our success last Thursday night is an indication that the credit-card giants can be successfully challenged,” Durbin told reporters yesterday. The swipe-fee restrictions would still need approval by the House of Representatives.

Bankers Opposed

Whitehouse’s amendment wouldn’t set rate caps, leaving that to individual states, with the law taking effect 12 months after enactment.

The American Bankers Association, the industry trade group and lobby, opposes the plan, saying in a statement that banks would face an “avalanche of lawsuits” as they try to comply with differing state laws. The amendment might mean less credit available for consumers and small businesses, the ABA said.

Visa Inc. and MasterCard Inc., the world’s biggest card networks, fell to the lowest levels since October after the Senate passed Durbin’s amendment. San Francisco-based Visa declined $2.55, or 3.3 percent, to $74.71 yesterday in New York Stock Exchange composite trading on top of a 9.9 percent decline May 14. MasterCard fell $1.64, or 0.8 percent, to $210.81 following an 8.6 percent drop in the previous session.

SOURCE: http://www.businessweek.com/news/2010-05-18/credit-cards-could
-face-state-rate-caps-in-financial-overhaul.html