Sears, Roebuck & Co. Chairman Edward R. Telling yesterday called on Congress to approve a new category of bank that would guarantee consumer protections such as free checking with no minimum balance requirements.

Telling called the concept a family bank, and said it would be prohibited from making commercial loans, except to small busineses and family farms. Sixty percent of its assets would be in consumer loans. Other requirements would include disclosure of all relevant information on fees and rates, and restrictions on the length of check holds.

Since late last year, Sears Savings Bank in California has been offering a budget checking account that doesn't limit the number of checks written and charges no fee per check. However, it does not pay interest on the account. Several other banks and thrifts in that state have begun offering similar accounts, generally referred to as lifeline banking.

Kenneth Guenther of the Independent Bankers Association of America labeled the retailer's proposal "a wolf in sheep's clothing" because it is "trying to legitimize the nonbank bank." (A nonbank bank offers checking accounts but does not make commercial loans, so its functions are similar to the proposed family bank, minus the consumer protections.)

The IBAA adamantly opposes nonbank banks because large institutions, including retailers, have been using this legal loophole to evade prohibitions against interstate banking and thus compete with small banks nationwide.

Telling told the Economic Club of Detroit that "surveys show consumers believe companies like Sears, Citicorp and American Express are more innovative, and do a better job of meeting consumer needs than their own banks."

Telling said he believed the consumer protections he proposed would answer the objections of House Banking Committee Chairman Fernand St Germain (D-R.I.) to increased banking deregulation. St Germain was unavailable for comment yesterday.

St Germain has vowed to close the nonbank-bank loophole. When his committee passed legislation last year to do so, Sears Savings Bank was grandfathered. However, under that bill the parent company would have to divest itself of its nonbank bank in Delaware.

The giant retailer has pushed consistently against regulatory barriers in its efforts to set up a nationwide financial services network. It now offers insurance, stocks, credit cards and certificates of deposit through subsidiaries.

In Washington, Stephen Brobeck of the Consumer Federation of America welcomed Telling's proposal cautiously. "The consumer protections in the Sears family-bank bill are excellent, but should be required of all banking institutions," he said.