WASHINGTON - Citing numerous violations of consumer protection rules, the Federal Reserve Board last week rejected Johnson International Inc.'s bid to acquire Seaboard Savings Bank of Stuart, Fla.

The Fed said the Racine, Wis.-based holding company misreported Home Mortgage Disclosure Act data and violated the Truth-in-Lending Act, the Equal Credit Opportunity Act, and the Truth-in-Savings Act. It also failed to comply with the Electronic Funds Transfer Act and the Expedited Funds Availability Act.

"Management of Johnson must focus attention on compliance efforts within its existing organization," the Fed said March 27 in rejecting the application. "The acquisition of another company would distract management from that effort."

The Federal Deposit Insurance Corp. discovered substantial compliance violations in 1989 and its two exams of Johnson since then.

"Obviously, we are disappointed that our request was turned down," said Andre Learman, senior vice president of Johnson International. But the bank is committed to correcting its problems and has not ruled out reapplying in the future, he said.

Johnson had argued that because it had instituted a comprehensive compliance plan at its Heritage Bank and Trust subsidiary, the Fed should approve the application.

The program includes expanded training, a review of all mortgage and retail loans for proper documentation, improvements to HMDA data collection, and implementation of new audit procedures.

"We expect to receive a satisfactory review in our next exam," Mr. Learman said. "Our organization has put the highest priority in resolving the problems."

The Fed said in its order that it is too early to tell if these changes will work. "Failure to address these violations and the deficiencies in corporate policies and practices that permit these violations to continue over an extended period of time" reflect adversely on "the managerial resources of Johnson," the Fed wrote in rejecting the application.

Janice C. Shields, a project coordinator at the Center for the Study of Responsive Law, said the Fed's action is a "step in the right direction."

"We would like to see more use of the tools the Fed has to enforce community reinvestment and consumer laws," she said.

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