Washington - Senate Democrats on Tuesday vowed not to back down to credit card companies, as the banking industry warned that legislation imposing tough reforms would make it harder for responsible customers to get credit.

    Sen. Christopher Dodd, chairman of the Banking Committee, said he hoped the legislation would pass this week. President Barack Obama has said he supports the measure and wants a bill on his desk to sign by Memorial Day.

    "It's been a long time coming," said Dodd, D-Conn., of the proposal, which would prohibit arbitrary credit card rate hikes and make it harder for people under 21 to get a card.

    Democrats - particularly Dodd who faces a tough re-election fight next year - have clung to credit card reform as an easy way of providing voters a tangible benefit in the economic downturn.

    Obama is expected to focus on the issue at a town hall meeting in Albuquerque, N.M., this week. He has said that while free-flowing credit is important, "we can't tolerate profits that depend upon misleading working families."

    The banking lobby is pushing back. On Tuesday, the American Bankers Association warned senators in a letter that the measure could restrict credit at a time when Americans need it most.

    If enacted, the bill would "have a dramatic impact on the ability of consumers, small businesses, students, and others to get credit at a time when our economy can least afford such constraints," the ABA wrote.

    Lawmakers seemed unmoved by the argument. Sen. Richard Shelby, the top Republican on the Banking Committee, said he would support the bill, while Democrats accused lenders of exploiting the recession.

    "In this record-low interest rate environment, it is indefensible for card issuers to be charging struggling American families record-high interest rates, and their attempts to do so explain why so many people are so angry at credit card companies," said Sen. Chuck Schumer, D-N.Y.

    A primary provision in the bill addresses the concept of "universal default." Credit card companies often increase a person's interest rate on past balances if the person is late paying that bill or others.

    Under the Senate bill, a person must be more than 60 days behind on payments before being subject to retroactive rate hikes. Even then, the credit card company would be required to restore the previous, lower rate after six months if the consumer pays the minimum balance on time.

    If a lender believes the person poses an increased risk because they have defaulted on that account or others, it could still increase the interest rate on future purchases. But the lender would have to provide the customer an explanation and 45 days' notice. The lender also must review the account terms again in six months and lower the rate if appropriate.

    The bill also would prohibit lenders from giving cards to people under 21 unless a parent or guardian accepts responsibility for the debt or the individual can prove they have the means to pay it back.