Before the government permits E-Trade Group Inc. to buy Telebanc Financial Corp., it should force the on-line discount brokerage to reinvest in communities nationwide, critics said.

Telebanc's thrift subsidiary, Telebank, now limits its Community Reinvestment Act investments to Arlington, Va., where it is headquartered and operates its only branch. That would not change after the proposed merger, according to the CRA plan that Menlo Park, Calif.-based E-Trade filed in July with the Office of Thrift Supervision.

Inner City Press/Community on the Move, a Bronx, N.Y.-based community group, has filed three letters of protest against the application, the latest this week. It said the OTS should require Telebank to meet the needs of low- and moderate-income people nationwide.

"The new E-Trade/Telebank is going to be involved in lending in a number of ways and yet is seeking to keep its CRA (assessment) limited to Arlington, Va.," said Matthew Lee, executive director of Inner City Press. That is "inconsistent with the policy approach OTS is taking with other applications," he added.

E-Trade announced plans to buy $3.2 billion-asset Telebank in May. A spokeswoman for Telebank said its general counsel referred questions about CRA compliance to its chief compliance officer, who is out of the office this week. E-Trade did not respond to calls.

OTS officials do not comment on pending applications, but in a mid-June speech agency Director Ellen Seidman questioned how geography-based CRA exams can suffice when financial institutions are delivering services by mail, over the Internet, and through other channels.

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