Two consumer organizations are trying to block the sale of Mellon Financial Corp.’s retail and small-business banking operations to Citizens Financial Corp., charging that Citizens is guilty of racial bias in its lending.

On Monday, the Delaware Community Reinvestment Action Council and the Inner City Public Interest Law Center presented a 12-page objection to the proposed $2.1 billion acquisition of 345 Mellon branches in Pennsylvania, Delaware, New Jersey, and Maryland. The petition was filed with the Federal Reserve Board, the Federal Deposit Insurance Corp., and state regulators.

“Given the disparities in Citizens’ 2000 mortgage lending record, we have grave concerns about its proposed expansion,” said Matthew Lee, the executive director of the Inner City Public Interest Law Center, which is based in New York.

Using data filed under the Home Mortgage Disclosure Act, Mr. Lee contended that Citizens Bank, a subsidiary of Providence, R.I.-based Citizens Financial Corp. let race play a role in processing applications for conventional mortgages, home improvement loans, and mortgage refinancings. The company, which is owned by Royal Bank of Scotland, is not living up to the Community Reinvestment Act, Mr. Lee charged.

Data for 2000, which were released in July and quoted in the protest filing, said that Citizens had gotten four mortgage applications from African-Americans in Rhode Island and denied them all. In contrast, the bank got 62 applications from whites and processed 44 loans.

For refinancings, Citizens denied 16 of 20 applications by African-Americans and 29 of 34 similar applications from Latinos, Mr. Lee said. The company, however, approved 561 of 995 applications by whites, he said.

The trend continued in home improvement loans, Mr. Lee said. In the Providence area, Citizens denied 39 of 49 applications by African-Americans and originated nine loans. From Latinos, the bank got 126 applications, denied 107, and originated 14 loans. It originated 836 loans to whites out of 1,578 applications, according to the data.

“In looking at the data, the racial disparities jumped out at us,” Mr. Lee said. “It is quite striking. The performance in the past has been quite bad. It needs to improve.”

A representative of Citizens Financial who is knowledgeable about the challenge did not return telephone calls seeking comment.

Meanwhile, Mr. Lee has also charged that a Citizens affiliate, Greenwich Capital Markets, employs predatory lending practices. It supplies mortgage-backed securities, underwriting, and other services to subprime lenders.

Citizens Financial’s deal to buy Pittsburgh-based Mellon’s retail and small-business units is scheduled to close in the fourth quarter. It would make Citizens one of the 20 largest U.S. banking companies. Citizens would gain 345 branches and $13.4 billion of consumer and commercial deposits. The deal also would bring $6.1 billion of loans, mainly to small- and middle-market banking customers.

Royal Bank also owns a private bank in Miami and has corporate banking offices in New York and Houston. Citizens, with $32.4 billion of assets, contributes 8% of its parent’s overall profits through consumer banking.

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