BOSTON - Fleet Financial Group hit rough weather at a Bay State hearing on its plans to merge with Shawmut National Corp.

Fleet representatives at the hearing, held at the Federal Reserve Bank of Boston, ended up mounting a defense against charges that the bank's finance unit had forced elderly and infirm borrowers from their homes.

In a brief interview before Saturday's hearing, Fleet chairman Terrence Murray acknowledged the inopportune timing of the accusations. He added, "We don't even know what they're asserting at this point."

Mr. Murray didn't have to wait long to find out.

A Michigan-based community group produced a former Fleet employee and a former contractor to testify about Fleet Finance's alleged strong-arm tactics in Michigan.

The testimony followed a lawsuit that the community group - Council on Aging - filed against the Fleet unit, alleging that customers in the late 1980s and early 1990s were frequently signed to mortgages they could not possibly afford.

The 65-page suit, which seeks class action status for as many as 400 borrowers, accuses Fleet Finance of "violating state and federal laws, breaching contracts, committing frauds on their customers, and damaging the equity of Michigan homeowners."

Fleet executives call the allegations fabrications. "Based on what we've heard about the specific borrowers in the suit, the suit has no merit," said P. Emery Covington, senior executive vice president of Fleet Finance since last November.

"We've always worked with people who get into trouble," Ms. Covington said. "We do everything we can to avoid foreclosure."

She spoke in a doorway at the Federal Reserve Bank of Boston, where she and other Fleet executives were informally fielding questions from attendees after the Council of Aging testimony.

In morning testimony before a panel of executives from the Boston Fed and the Federal Reserve Board, Virginia Davis, a former loan officer in Michigan, said many Fleet Finance customers "are being ravaged by their debt" because of the way Fleet Finance structured loans.

Ms. Davis said loan collectors made it very difficult for delinquent customers, including one with HIV who was "constantly ... harassed."

Jerry Watha, who accompanied Ms. Davis, identified himself as a former contractor to Fleet whose job was "to help them hide delinquent mortgages."

Mr. Watha, who is currently in court with Fleet over $600,000 he allegedly owes the company, said he witnessed "threatening" phone calls by loan collectors. The Fleet Finance representatives would also visit customers as late as 11 p.m., Mr. Watha said.

Ms. Covington said there is no indication that this kind of activity went on at the Michigan unit, which was closed a year ago as Fleet Finance sought to consolidate processing operations.

She also said the Michigan allegations don't resemble ones made against Fleet Finance by borrowers in Atlanta. Fleet Finance reached a settlement with those borrowers in 1993.

To minimize the issue, Fleet handed out loan histories and made executives available for comment. Industry analysts said it was not clear how heavily the allegations would weigh with Fed governors as they evaluate the merger plan.

William N. McDonough, a Boston Fed executive vice president who participated in Saturday's hearing, said he and his fellow executives would not comment on specific testimony.

However, he said, all statements carry weight. "Everything is taken into consideration as part of the record."

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