DANA POINT, Calif. - Compliance officers must keep better tabs on their sales and marketing departments to avoid trouble with their regulators, consultant Lucy Griffin said last week.

Ms. Griffin, addressing the California Bankers Association's annual compliance conference, said these departments often forget about compliance issues when they promote a product.

"The inventiveness of your marketing and sales departments, who have a tendency to bait and switch, are the people you have to keep on top of," said Ms. Griffin, president of Compliance Management Services of Falls Church, Va. "That is a compliance no-no."

Compliance officers should look especially closely at all promotional campaigns, ensuring that they include the appropriate disclosures such as the annual percentage yield.

This was just one of a dozen common compliance problems that bank officials were warned to guard against. Others include Truth-in-Lending, fair-lending, and flood insurance rules.

Truth-in-Lending creates the largest number of headaches, resulting in 3,144 citations by the Federal Reserve System alone in 1994.

"It ought to be in the 'been there, done that' category," Ms. Griffin said. "But no way. This is one of our biggest problem areas."

She blamed the lapses on constantly changing rules and procedures. That excuse, however, won't protect bankers from large potential penalties, she said.

The fair-lending laws are another problem area. Many banks are improperly recording rejected counteroffers as withdrawn applications, she said. That has caused some institutions to have an equal number of withdrawals and rejections, a situation that sets of alarm bells among examiners.

Bankers also have been lax with flood insurance. The policies take 30 days to become effective, yet banks are allowing people to close before their policies kick in, Ms. Griffin said.

Bankers, she said, are just asking for a lawsuit when they let a customer's flood policy lapse. If the house is destroyed in a flood, the bank will be liable, she said.

While banks are earning significant fees by servicing loans, they also are experiencing substantial compliance problems. Adjustable-rate loans cause particular trouble, Ms. Griffin said, because compliance officers must ensure that operations people are calculating the variable rate based on the correct statistical tables.

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