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Bankruptcy vote favors home lenders

WASHINGTON (AP) — Democratic opponents in the Senate are being stymied in their efforts to temper bankruptcy legislation that would force many consumers to eventually repay their credit card and other debts instead of having them dissolved.

The Senate voted 50-49 on Thursday to reject a provision that would have prevented high-cost home lenders that violated truth-in-lending laws from staking a claim to a debtor's assets in bankruptcy court.

Sen. Peter Fitzgerald, R-Ill, voted "present" to avoid a potential conflict of interest because his family owns a bank.

Sen. Richard Durbin, D-Ill., the amendment's author, said it was targeted at home lenders that exploit "some of the most vulnerable people in America," notably minorities and the elderly, by charging excessive interest rates for people who may have poor credit histories and imposing punitive terms on mortgages. The provision would have applied to lenders that, for example, imposed fees, such as prepayment penalties, that violated truth-in-lending rules for high-cost home loans.

But Sen. Phil Gramm, R-Texas, chairman of the Senate Banking Committee, said before the vote it "would deny access to the American dream for millions of people" seeking home mortgages.

The Democratic foes' first attempt failed on Wednesday, when the Senate voted not to allow people seeking bankruptcy protection because of disastrous medical bills to have a better chance of erasing their debts in court than consumers filing for other reasons.

Senators voted, 65-34, to reject the exemption for medical debts from the bankruptcy overhaul legislation, which overwhelmingly passed the House last Thursday and is expected to be signed by President Bush if it reaches his desk.

The bipartisan bill was vetoed in December by then-President Clinton, who contended it would hurt ordinary people and working families that fall on hard times.