Credit card companies would have to disclose interest rates and fees in clearer, easier-to-understand language under proposed new consumer-protection rules that could take effect by year-end.

The proposed rules, which the Federal Reserve Board unveiled yesterday after a 2 1/2 -year study, would be most significant change to the nation's truth-in-lending regulations in 26 years. The proposal comes as some key members of Congress are intensifying efforts to curb aggressive marketing and pricing practices by retail lenders that consumer groups for years have complained are unfair and deceptive.

The new rules would require companies to tell customers 45 days before terms of a credit card contract are changed, compared with 15 days now. And the rules would expand the list of changes requiring advance notice to include those involving penalty interest rates, which often range above 30 percent. Today, most consumers learn only after opening their monthly bills that they have been penalized with significantly higher interest rates because of paying late, going over their credit limits or falling behind with another lender.

Because much of the type in disclosures is so small, many card holders do not bother reading the statements. The new proposal calls for larger type in some instances. It would also require companies to say on monthly statements what interest and fees a customer had paid so far for that calendar year.

Companies would also be required to spell out that low rates on balances transferred from another credit card apply only to that balance, not to new purchases. And it would require companies to apply payments to the debt carrying the highest interest rate. Many companies now apply payments to the least costly debt, thus forcing customers to pay more in interest.

The Fed, taking a cue from corporate marketing practices, questioned small groups of consumers on how best to word some sections of the proposed new rules. The bank regulatory agency found, for example, that individuals didn't take notice of disclosures labeled "default rate" but did pay attention when the same information was labeled under the heading of "penalty" rates.

Credit card issuers hope better disclosure would head off attempts in Congress to outlaw some of the industry's most complained-about practices. They praised the proposed rules yesterday, saying the complexity of pricing for credit cards and other revolving credit over the past two decades has overtaken current regulations.

"We strongly agree that improved disclosures empower consumers to make better choices in our competitive marketplace," said Edward Yingling, head of the American Bankers Association, a lobbying group that represents the biggest credit-card issuers.

Consumer groups and some lawmakers said the Fed's proposal would improve disclosure, but does not go far enough. They said new laws are needed to ban some industry practices, including that of charging interest on debt that has been paid. For example, if a consumer buys a $3,000 sofa, then pays $2,500 of that bill on time, some major firms will charge interest on the entire $3,000.

"Better disclosure is critical to helping consumers, but it is no substitute for outlawing abusive credit-card practices that unfairly mire American families in debt," said Sen. Carl M. Levin (D-Mich.). "Congress needs to do more than require that unfair credit card practices be disclosed -- it needs to end them."

Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.), whose committee oversees credit card lenders, had a similar view.

Two weeks ago Levin and others introduced a bill that would, in part, bar companies from charging interest on debt paid by the due date, cap penalty interest-rate increases, prohibit interest from being charged on late fees or over-the-limit fees and prohibit late fees if a card-issuer delays crediting a payment.

"The [Fed's] proposal has several innovative ideas that will give the consumer better information about their credit-card costs," said Travis B. Plunkett of the Consumer Federation of America. "The bad news is that the proposal doesn't eliminate a number of common, abusive practices that only Congress can stop."

The Fed will seek comment for four months, then make changes based on those comments before issuing final rules.