First Alliance Corp. says that bureaucratic delays at the Office of Thrift Supervision cost it a pending merger that may affect its budding credit card operations.

"It was frustrating," said Mark Mason, chief financial officer at First Alliance.

The Irvine, Calif.-based subprime lender applied for a thrift charter last May to buy Standard Pacific Savings, a thrift subsidiary of Standard Pacific Corp., Costa Mesa, Calif. Legally, First Alliance needed a depository institution like Standard Pacific Savings to issue a new home equity-backed credit card.

But in December the regulator asked for a 30-day extension for approval of the charter, and then in January for another. By then it was too late. Standard Pacific announced Feb. 2 that it was seeking another buyer; the merger agreement with First Alliance had expired Jan. 31.

An OTS spokesman suggested that First Alliance could have pursued its application, but "time had expired on an agreement to buy a thrift, so they withdrew."

But First Alliance contends that the only reason its agreement with Standard Pacific Savings expired was the OTS' foot-dragging.

"We weren't a bank or a thrift, and we hadn't owned one," explained Mr. Mason. "It caused them to ask a lot of questions."

First Alliance's ordeal comes as the OTS faces an influx of applications for thrift charters. Insurance companies, securities firms, and even subprime mortgage lenders are filing for the charters at a record rate.

Associates First Capital Corp., Dallas, is in the midst of review for a thrift charter, and observers say the process has been trying for the lender.

Other players in the industry said the OTS was wary of the high fees First Alliance charges to extend credit to borrowers with poor credit ratings.

First Alliance charges origination fees that average 10 to 12 points for its first and second mortgage loans.

But First Alliance denies that was an issue. "The OTS never communicated that to us," Mr. Mason said. "They told us that there was no problem with our business."

The OTS declined to comment on the subject, but said that it is very rare for applicants to be denied a charter. "Usually they are withdrawn," the spokesman said.

Other subprime lenders expressed surprise at First Alliance's willingness to expose itself to the type of scrutiny that comes with applying for a thrift charter.

Merrill Ross, an analyst with Friedman, Billings, Ramsey & Co., said when she heard First Alliance was applying for a thrift charter, she asked herself: "Why would you want to take on that kind of burden?"

First Alliance is still planning to expand its credit card program, Mr. Mason said. The company is working with Fidelity Federal Bank, a subsidiary of Los Angeles-based BankPlus, on the program, he said. So far, the company has about $1 million in home equity-backed credit card outstandings.

But First Alliance may still be smarting over the loss of Standard Pacific. "It will be a nice acquisition for someone else," Mr. Mason said.

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