Group challenges Howard bank buyer

Fulton accused of bias against minorities

November 22, 2005|By LAURA SMITHERMAN | LAURA SMITHERMAN,SUN REPORTER

Fulton Financial Corp.'s acquisition of Columbia Bancorp, a community bank based in Howard County, has been challenged by a consumer advocacy group that alleges the larger bank discriminates against minorities in mortgage lending and shouldn't be allowed to expand.

The New York City-based Inner City Press/Fair Finance Watch, a group that frequently weighs in on bank mergers, asked the Federal Reserve to deny the application from Fulton Financial, based in Lancaster, Pa., to buy Columbia Bank for $313 million in cash and stock. The two banks need the approval of regulators for the deal to close as early as next year.

"Fulton Financial has been expanding by purchases of relatively small banks but with insufficient scrutiny by the Federal Reserve," said Matthew Lee, executive director of Inner City Press.

Lee said his group found "outrageous disparities" in Fulton's lending practices.

The group bases its allegations on data that banks across the nation were required to disclose for the first time this year and that show African-American homebuyers are more likely than white applicants to get mortgages with higher interest rates.

The disparities prompted the Federal Reserve to begin a review of dozens of banks. Protests have been launched by community groups, such as Inner City Press and ACORN, an advocacy group for low-income borrowers. And banks have mobilized campaigns to defend their practices, cautioning that the public data don't include credit scores and other information, which could explain away differences between races.

Inner City Press also challenged Bank of America Corp.'s $35 billion acquisition of MBNA Corp., with similar allegations of discriminatory lending.

In previous fights, Inner City Press has had some success.

SunTrust Banks Inc. said it would stop making loans to payday and car-title lenders after the group had urged the Federal Reserve to scrutinize the practice as part of SunTrust's application to buy National Commerce Financial Corp.

Officials at Fulton Financial, which has 14 banking subsidiaries from northern New Jersey to Virginia Beach, Va., denied that discrimination plays a role in their decisions about lending. "There are always two sides to every story," said Rufus A. Fulton Jr., Fulton's chairman and chief executive. "Nevertheless we take this sort of thing very, very seriously, and will research it completely and respond accordingly."

John M. Bond Jr., chairman and CEO at Columbia, said he wasn't aware of the issue and couldn't comment. Columbia Bank has the largest market share in Howard County and also has branches in Baltimore and in Montgomery, Prince George's and Baltimore counties.

Lee said his group found that blacks were four times as likely as whites to get higher cost mortgages at Fulton's Resource Bank in the Washington area. In the Virginia Beach and Norfolk, Va., areas, that rate climbed to five times as likely, and almost eight times as likely for refinance loans.

The group also said the bank excludes classes of people when making loans. Fulton's Peoples Bank of Elkton in northern Maryland and Delaware, for example, made 81 home purchase and refinance loans to whites and none to blacks or Latinos last year.

Columbia and Fulton agreed to their deal in July. The arrangement would enable Columbia to expand the services it offers and allow Bond to retain his job. It would be Fulton's largest acquisition to date and give the bank an entry into the lucrative Baltimore-Washington corridor.

laura.smitherman@baltsun.com

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