Banks Say AT&T; Is Illegally Marketing Its Credit Card

Four big 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 the phone giant is trying to act like a bank without being subject to banking laws. They added that AT&T; is improperly offering discounted long-distance calling as an inducement to gain customers.

One of the banks, San Francisco-based BankAmerica Corp., said it wants a level playing field so it can 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.” The other banks that are complaining are Citicorp, MBNA America Bank and Chase Manhattan Corp.

In the FCC filing, the banks said that by offering 10% long-distance discounts to holders of its AT&T; Universal Card, the phone company is discriminating against other AT&T; customers.

AT&T;, which in March began offering a combined phone card/Visa or phone card/MasterCard, called the 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 the year, with a portfolio estimated at $5 billion.

Credit card industry officials have said that consumers with wallets bulging with plastic probably would find a combined credit card attractive--and give traditional bank cards a lot of competition.

FDIC spokesman David Barr said the banks sent a 53-page petition--with a 10-page cover letter--to FDIC Chairman L. William Seidman. AT&T; spokesman Jim McGann said they also filed a complaint with the Georgia state banking commission.

The banks told the FCC that AT&T; was charging discriminatory phone rates, had failed to obtain approval for the 10% discount, failed to file tariffs for finance charges and late charges imposed on card users and discriminated against other credit card holders in access to phone service.

Peter Gallagher, senior vice president for corporate and consumer affairs at AT&T; Universal Card Services Corp., said AT&T; was not violating telephone rules because the card was being offered through an unregulated business, Universal Bank.

“We anticipated these questions,” Gallagher said, “but we did our homework” before offering the card in March. “I’m absolutely confident we are in total compliance with the appropriate laws, rules and regulations.”

As a so-called dominant carrier, AT&T; must receive approval from the FCC for all its telecommunications prices and contracts.

Gallagher said AT&T;’s agreement with Universal Bank, a subsidiary of Synovus Financial Corp. of Columbus, Ga., called for the bank to purchase “the receivables that are due for the calls charged to the universal bank card at the full tariffed rate. So there is no discount, there is no discrimination, and the Universal Bank bills and collects for those receivables and has decided to do it at a 10% discount rate.”