Peers ignored warnings from Earl Ferrers, Home Office minister of state, that the provision would be difficult to enforce.
Dealing the latest blow to Mr Howard's flagship Criminal Justice and Public Order Bill, they voted by 163 to 111 for an amendment sponsored by Lord Brightman, the former Law Lord, and Baroness Nicol, for Labour.
The new clause would aim to crack down on private investigation agencies, making it an offence to sell or offer to sell personal financial information obtained dishonestly or by deception and without consent.
It would ban advertisements and brochures by agencies offering to sell information about, for example, someone's bank balance. The maximum penalty would be five years' jail and a fine.
Lord Ferrers backed instead the Government's proposal to outlaw the procuring of computer-held personal information. He said this would be easier to enforce.