From community reinvestment to real estate lending, today's compliance officers must navigate among conflicting regulations.

The government has created regulatory paradoxes by layering new, often contradictory, requirements atop existing rules.

For example, the Equal Credit Opportunity Act clashes with requirements to prevent money laundering.

While bankers are expected to know their customers in order to prevent fraud, ECOA prevents them from asking for or keeping certain information about them, according to Phillips G. Gay Jr., senior vice president and compliance officer at Bank of North America in Ft. Lauderdale, Fla.

Mr. Gay said it has long been common practice for banks to make a copy of a new customer's driver's license. But under ECOA, it is illegal to retain information on people in any of nine protected classes, such as race or gender, Mr. Gay noted.

The Community Reinvestment Act also is causing compliance conundrums.

In order to boost CRA lending, many banks have instituted second reviews, in which denied loan applications are reevaluated.

"The dilemma is that if you do second reviews just for minorities, that can be reverse discrimination," said James T. Brankin, vice president and senior compliance officer at First National Bank of Chicago. First Chicago tries to avoid the problem by doing such reviews randomly, he said.

Donna Robey-Sullivan, corporate compliance officer at Cenfed Bank in Pasadena, pointed out one of the most common problems: Banks that self-test for lending discrimination can end up providing examiners with ammunition.

"Critical self-analysis is an important business tool," said Ms. Sullivan. "But it is a dilemma if you are testing for what the regulators are looking for."

As regulators shift the focus of CRA to lending from community outreach, competition for CRA loans is bound to heat up.

That competition could lead to new problems. For example, some banks are creating volume goals for loans in low-income to moderate-income areas and offering lenders $100 bonuses for each CRA loan made, according to Mr. Gay.

"An examiner would have a hard time accepting that if it came to light," he warned, noting that equal credit laws prohibit banks from making loan decisions based on race. So, paying employees to bring in CRA loans that may be going to blacks could violate ECOA, Mr. Gay said.

There also can be trouble when CRA meets the Real Estate Settlement Procedures Act.

If a community group or a lawyer helps a lender and a borrower make a deal, that's fine. But if the lawyer, for example, gets a referral fee, that's a violation of Respa. The law was passed to prevent kickbacks among people involved in the real estate settlement process, such as lawyers and consultants.

Still, if the fee was paid for another reason, such as borrower counseling, it's not a violation.

"There's a lot of gray out there," said Mr. Gay.

Safety and soundness rules also bring up quandaries for compliance officers.

For example, Michael Maher, compliance officer at First Bank System, Minneapolis, said he's always wondered why new account customers get better treatment than established customers under Regulation CC, the rule that implements the Expedited Funds Availability Act.

While new account holders get next-day availability on cashier and travelers checks, banks can put a hold on that money for other customers.

"That's an irony in the reg," Mr. Maher said.

Another paradox, he said, is within Regulation O, which governs loans to insiders. While insiders of a bank, its holding company, and an affiliated mortgage company are covered, insiders of a bank subsidiary are not. "It's kind of goofy," Mr. Maher said.

Ms. Robey-Sullivan at Cenfed said sometimes rules cloud the purpose of the law.

Truth-in-Savings, for example, was originally designed to help customers comparison shop. TIS disclosures, however, have become so complicated that many customers don't even read them.

Legislation addressing many of bankers' dilemmas - including a major overhaul of Truth-in-Savings - is moving through both houses of Congress.

Paul L. Sachtleben, director of compliance and consumer affairs at the Federal Deposit Insurance Corp., acknowledged the paradoxes, but added that the legislation should produce some remedies.

"The hearings on the Hill these days on regulatory burden relief are an attempt to deal with some of those issues," Mr. Sachtleben said.

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