WASHINGTON -- The Justice Department is reviewing the branching activities of Banc One Corp.'s Cincinnati bank as part of an ongoing probe into fair-lending practices at financial institutions nationwide, two people with firsthand knowledge of the process said.
John Russell, the spokesman for the bank's holding company, flatly denied that the Justice Department is investigating the bank. "It absolutely isn't Banc One," Mr. Russell said. "I've checked everywhere. There's nothing .... It's not us."
Bank One Cincinnati president Emerson L. Brumback was on vacation and could not be reached for comment.
But the two people with first-hand knowledge said the government is concerned that $2 billion-asset Bank One Cincinnati is focusing its branching activities, including acquisitions, on the predominately white suburbs while ignoring the predominately minority inner-city, the sources said.
The Justice Department has stated in similar cases that it considers branching a key to fair lending because minorities often do not apply for loans if they don't have a branch to go to in their neighborhood. Also, federal officials are looking at whether the bank makes similar efforts to market its services to both blacks and whites as required by the Equal Credit Opportunity Act and the Fair Housing Act.
The relatively low number of minority home mortgage applications convinced Justice to initiate the probe, the two people said.
Justice Department spokesman Myron Marlin declined to comment. The inquiry began more than a year-and-a-haft ago when the Cincinnati-based Coalition of Neighborhoods complained about Bank One's lending practices to Justice.
Coalition associate director Morris Williams, who confirmed filing the complaint, would not comment on whether the department is investigating.
But, he did say that Bank One is ripe for a probe. "It has discriminated in every area of its operation," Mr. Williams said of the bank.
Mr. Williams said the bank does not employ nearly enough minorities, does not have any African-Americans on its board of directors, and meets only a fraction of the credit needs of the minority communities.
He said Justice officials told him that a lack of resources are delaying its effort to prosecute fair-lending cases.
The Justice Department has filed cases against five institutions since 1992 for fair-lending violations. This investigation, if it results in the government
filing formal charges, would mark the second time the department has shined its spotlight on branching activities rather than on loan applications.
The other branching case, U.S. v. Chevy Chase Federal Savings Bank, was settled last week when the Maryland Thrift agreed to open more offices and make at least a $140 million in discounted loans to low-income parts of Washington, D.C., and the surrounding area.
Community Reinvestment activists said the size of Banc One - it's the eighth largest bank holding company in the country, with assets of $90 billion and 82 affiliates - make this case important.
"This is the biggest bank ever to be targeted," said Kenneth R. Thomas, author of a widely cited book on the topic. "We are now talking about one of the top 10 banks in the country."
Many bankers and lawyers would like to see a bank challenge the Justice Department theory that failure to branch into minority areas can constitute a fair-lending violation.
However, that probably won't happen in this case, even if Justice brings an action against the bank.
Mr. Thomas said the bank would he better off settling, rather than fighting the charges. A settlement would prevent community groups from using the investigation as the basis for challenging future mergers and acquisitions on Community Reinvestment Act grounds, he said.
This is not the first time Bank One has found its Ohio operations under scrutiny.
A coalition of community groups forced the bank in the spring of 1993 to pledge $67 million for low-income lending in Cleveland.
The bank agreed to the commitment after the groups protested the bank's acquisition of Valley National Corp. of Arizona.
