In a sign of rising tension between banks and community activists, Fleet Financial Group has charged two prominent activist groups with violating a "no-protest" clause in community reinvestment contracts.

Fleet, in a letter to the Federal Reserve, said Inner City Press- Community on the Move of the Bronx, N.Y., and New Jersey Citizen Action have both opposed Fleet's planned acquisition of National Westminster Bank's U.S. retail operation despite having agreed not to protest any deal involving Natwest. (The Fed approved the deal April 15.)

The complaint came as banks and activists nationwide are clashing over the community reinvestment implications of the industry's rapid consolidation.

The letter, dated March 28, questions whether banks striking deals to avoid Community Reinvestment Act protests can trust neighborhood groups.

"This apparent material breach of this existing agreement ... is of great concern to Fleet," senior vice president Agnes J. Bundy wrote. "Both Fleet and Natwest are currently in the process of exploring various options in an effort to enforce the terms of their agreement, and-or exercise remedies available at civil law."

New York lawyer Warren Traiger said he doubts Fleet will sue since the two community groups lack the resources to pay a damage claim. "You can't get blood from a stone," he said.

That may be why Fleet turned to the Fed. The central bank has said it will not get involved in enforcing contracts between private parties. Still, a letter criticizing the activists could undercut their influence at the Fed.

A confidential August 1994 contract obtained by American Banker appears to support Fleet's claim. In the contract, Inner City Press-Community on the Move agreed not to protest any deal involving Natwest for three years. Sources said the contract with New Jersey Citizen Action contained similar terms.

Inner City Press has become one of the most vocal community groups in the country, filing CRA protests against more than a dozen institutions during the past two years. Its efforts have brought banking offices and loans to the Bronx. New Jersey Citizen Action has been just as vocal within its state and has brought investments to low-income areas.

Matthew Lee, Inner City Press' executive director, said his group isn't at fault. He said Natwest broke the contract, which was supposed to remain confidential, by distributing copies of it to other banks. The deal becomes void if either side breaks its terms.

"We were already out of the contract legally," Mr. Lee said. "We will defend that in any forum."

Mr. Lee added that his group no longer agrees to "no-protest" clauses. "For a regulated industry to ask a community group to sign away its right to protest corrupts the whole system," he said.

New Jersey Citizen Action executive director Phyllis Salowe-Kaye also said her group hadn't broken its contract. She declined to comment further, citing Fleet's threatened lawsuit.

Bankers and lawyers said the community groups' decision to protest the Natwest deal has left them questioning whether they can trust the groups to abide by future contracts.

"You can't deal with someone who has no integrity," said a banker who asked not to be named.

A banking lawyer said institutions should think twice before signing such deals. "What you have in this game is your word," Mr. Traiger said. "If people can't trust you, you are going to be a lot less effective. This really serves to undercut the community group cause."

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