AT&T;’s Credit Card Illegal, Banks Assert to Regulators

Four major banks are complaining to federal regulators that American Telephone & Telegraph Co. is illegally marketing a combined general credit card and phone calling card.

The banks, in filings with the Federal Communications Commission, the Federal Deposit Insurance Corp. and the Federal Reserve, said that the phone giant is trying to act like a bank without being subject to banking laws and that it is improperly offering discounted long-distance calling as an inducement to gain customers.

One of the banks, San Francisco-based BankAmerica Corp., said Thursday that it wanted only a level playing field in order to compete against “a non-banking company with tremendous market presence (that) is in practical effect directly offering a banking service without being subject to banking laws and bank regulatory oversight.”

In their FCC filing, the banks said that by offering 10% long-distance discounts to holders of its AT&T; Universal Card, the telephone giant was illegally discriminating against other AT&T; customers.

AT&T;, which in March began offering its calling card customers a combined phone card-Visa or phone card-MasterCard, called the banks’ allegations “absolutely without merit.”

The FCC filing cited published reports estimating that AT&T; could have 5 million customers for its credit card by the end of this year, with a total portfolio estimated at $5 billion.

Credit card industry officials have said that consumers loaded down with bulging wallets full of plastic probably would find a combined credit card attractive--and put big pressure on traditional bank cards.

Doug Jones, the FDIC’s deputy general counsel, said the banks--BankAmerica, Citicorp, MBNA America Bank and Chase Manhattan Corp.--were “alleging banking violations.” He would not elaborate.

FDIC spokesman David Barr said the banks sent a 53-page petition to the agency Tuesday.