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In October, NationsBank South Chairman Hugh M. Chapman spoke at First Iconium Baptist Church in Atlanta before a mainly nonwhite crowd of 10,000 who jammed the church sanctuary and spilled over to a gym, a parking lot and a nearby park (where the audio was piped in). Chapman preached a gospel of home ownership and fair lending and announced a $500 million mortgage-lending partnership in Atlanta and four other cities with the Neighborhood Assistance Corporation of America (NACA), a nonprofit group that helps low-income people buy houses.

A month later, from a different pulpit, the bank's sister company, NationsCredit, was under attack from a local advocacy group. The activists said the wholly owned subsidiary of NationsBank Corp. was charging minority customers exorbitant interest rates 4 to 8 points above average bank interest rates.

At a time when many banks continue to be attacked for neglecting minority neighborhoods, it may seem odd that a finance company is being criticized for doing too much business in these same neighborhoods. But critics say finance companies, like traditional loan sharks, prey on homeowners who have nowhere else to go. At the same time, banks are finding these companies an irresistible investment.

Fair lender. For Charlotte, N.C.-based NationsBank Corp., the country's fifth-largest bank, the predicament is an embarrassing one. The bank is quick to publicize its reputation as a fair lender and gets high marks from the Office of the Comptroller of the Currency for its commitment to lending in Atlanta's minority neighborhoods. But the concentration of loans from NationsBank in these neighborhoods isn't anywhere near as great as that of loans from NationsCredit. In Atlanta, some 70 percent of NationsCredit loans were in minority neighborhoods between 1993 and 1995, according to Atlantans Building Leadership for Empowerment. Even as NationsBank is aggressively reducing the number of branches it maintains around the country, NationsCredit is increasing its outlets. In effect, critics say, the laudable efforts by one division of NationsBank Corp., which is pushing to become the nation's largest bank, are being undercut by the questionable practices of its newer division.

Spurred in part by Atlanta's experience, fair-lending activists in New York, Tennessee and New Mexico are trying to block NationsBank's $9.6 billion merger with Boatmen's Bancshares Inc. until NationsCredit's practices are fully investigated. NationsBank denies any impropriety in its lending through NationsCredit and expects to win approval for the merger.

NationsBank is hardly the only bank plunging into the profitable market of "subprime" lending, which in exchange for high interest lends to consumers with credit ratings below bank-industry standards. Many large U.S. banks have gotten into the act through nonbank subsidiaries, reaping an average return on assets nearly twice as high as that of their federally regulated brethren. NationsBank entered the market in 1993 with the acquisition from Chrysler Corp. of what is now NationsCredit. With $10 billion in assets, NationsCredit is the largest finance company controlled by a U.S. bank.

NationsBank hopes its fair-lending profile will help NationsCredit overcome the sullied image of the $150 billion finance-company industry, which is undergoing increased scrutiny by federal regulators. "We want to be the good guys in this industry," insists NationsBank's top community reinvestment official, Catherine P. Bessant. The bank has spent $13 billion on community development, auto loans and mortgage lending in underserved communities. And while NationsCredit charges steep rates, it makes loans that otherwise wouldn't get made, argues Bessant. "We look at NationsCredit as one way NationsBank Corp. provides a continuum of service" across lending profiles, she says. "They [NationsBank and NationsCredit] should be one and the same image."

In time, Bessant says, changes at both NationsBank and NationsCredit will benefit low-income and minority borrowers. For instance, the NACA program and partnerships with other housing-advocacy groups are teaching NationsBank new ways to evaluate credit history, debt load and work history so that the bank can safely and fairly increase its lending to minority and low-income groups. And starting in February, NationsCredit's loan officers will receive cash bonuses when they refer to NationsBank applicants whose credit merits a lower-interest bank loan.

Expensive loan. But with NationsBank and NationsCredit targeting the same clientele, odd disparities arise. While Washington, D.C., resident Audrey Hendricks has happily refinanced two outstanding home equity loans through the NACA-NationsBank program for a monthly savings of $400, Atlanta cabdriver Richard Davis will spend some $46,000 in principal, interest and fees to retire $19,000 worth of NationsCredit debts.

Davis and others dissatisfied with their NationsCredit loans could potentially tap NationsBank's own money to refinance at better rates, says Bruce Marks, who heads NACA. "In effect, NACA's job is to put NationsCredit out of business." NACA plans to not only lend for home purchases and improvement but also help forestall foreclosures and replace high-priced financing. So far Marks has collected a total war chest of $1.1 billion-- from NationsBank and others--to do it.

Still, that won't resolve the ongoing paradox, critics say. "If NationsBank is committed," asks Atlanta housing activist Gwen Robinson, "why are they refinancing rather than changing the way NationsCredit does business?" Bessant says the company will work closely with local groups to address their concerns. But, she argues, because of the different risks inherent in the two markets, ultimately consumers and activists will have to accept the fact that when it comes to NationsBank and NationsCredit, the two businesses are separate and unequal.