Protests by a community activist group could delay the sale of BankAmerica Corp.'s consumer finance unit to Travelers Group Inc.
Inner City Press/Community on the Move, a Bronx, N.Y.-based activist group, has accused Travelers' Commercial Credit subsidiary of "predatory lending," or targeting minority communities with high-rate loans.
Baltimore-based Commercial Credit announced Monday that it plans to acquire Security Pacific Financial Services, the BankAmerica unit, for $1.6 billion.
Commercial Credit "disproportionately targets African-Americans for higher-than-normal interest rate credit," Inner City asserted in a protest filed with the Office of Thrift Supervision.
For example, in Asheville, N.C., Commercial Credit's ratio of white to African-American borrowers was 3-to-1, while the aggregate industry's ratio in that city is 29-to-1, the activist group said.
Travelers declined to comment on the charges, but attorneys who represent lenders dismissed Inner City's accusations.
"There is nothing inherently unlawful about serving a minority community," said Larry Platt, an attorney with Kirkpatrick & Lockhart, Washington. Commercial Credit's rates may by higher, he said, but "if those borrowers don't qualify for traditional product, it isn't the lender's fault."
Inner City also is protesting an April 30 application to convert Traveler's state-chartered commercial bank into a federal savings bank. Inner City criticized Traveler's Bank's compliance with the Community Reinvestment Act as "lackadaisical and insufficient."
The Federal Deposit Insurance Commission awarded Traveler's Bank a "satisfactory" rating in its last CRA exam.
According to Travelers' application, Commercial Credit's real estate operations and systems would be shifted to the new thrift. Before approving this request, Inner City wants OTS to hold a hearing on Commercial Credit's record of community reinvestment.
Inner City also claimed Travelers will have to amend its application, because the Security Pacific acquisition would mean that another $1.2 billion in real estate loans would be shifted to the new thrift.
Inner City, according to executive director Matthew Lee, is trying to get the Justice Department interested in the case. He sees a parallel with the Justice Department's investigation of Long Beach Mortgage Co. Last September, the subprime mortgage lender agreed to pay $4 million to settle complaints that it charged women and minorities higher rates for loans.
"We're going to try to find a way for this to be under the Fed's jurisdiction," Mr. Lee said. "Our first step is figuring out where to throw the rocks."
Detractors argue that Inner City would better serve the minority community through education. "If he (Mr. Lee) was to go into the neighborhoods he purports to serve and hold counseling workshops on buying mortgages, he would do a lot more for the community," said Mr. Platt.
The activist group has gotten results protesting mergers via CRA and fair-lending complaints. In 1994, Inner City spurred an OTS investigation into Dime Savings Bank and Anchor Savings Bank, and in mid-1995 it forced Bank of New York to commit $15 million in loans to the Bronx.
