ECOA Flashcards
Carmen Thomas is meeting with the loan officer of her bank, Mark Shellig, to discuss a loan she would like to get to make some repairs on the house she has lived in for 18 years. Carmen is interested in a home equity line secured by her home. During the loan interview, Mark expresses his concern that she may not qualify for the loan based on her current income and asks if her husband can cosign for her. He also asks how many children she has and if she plans to have more. Finally, he tells her she will need to include information about her race, sex, marital status, and age on the loan application. Which option lists possible consequences the bank might be subject to if Carmen sues the bank due to Mark’s inappropriate questions?
A. The bank will be assessed punitive damages, actual damages and attorney’s fees
B. The bank will no longer be allowed to make home equity loans
C. Mark will be fired
D. Loan staff will need to be re-trained
The correct answer is a. B, C, and D are incorrect because, although those things could happen, it is likely that the bank will be assessed punitive and actual damages and will have to pay attorney’s fees.
Mr. and Mrs. Link have applied for a real estate loan with National Bank. Under Reg B revisions, National Bank is required to notify the Link’s in writing of their right to receive a copy of their appraisal or valuation. The disclosure of an applicant’s right to receive the appraisal must be mailed or delivered no later than what day?
A. The seventh business day after receiving an application
B. The seventh calendar day after receiving an application
C. The third business day after receiving an application
D. The third calendar day after receiving an application
The correct answer is c. A, B, and D are incorrect because the disclosure must be mailed or delivered no later than the third business day after receiving an application.
The Reg B appraisal rules are triggered by what event?
A. An application for credit that is to be secured by a first lien on a 1-4 family dwelling
B. An inquiry about loan rates and terms
C. The refinance of a 20-unit apartment complex
D. An application for an auto loan if the applicant plans to live in his car
The correct answer is a. B, C, and D are incorrect because the appraisal rules apply when an application is received for a loan secured by a first lien on a 1-4 family dwelling. Motor vehicles are not dwellings even if used as such.
- Amanda, a loan officer, has three loan files on her desk. One file includes a consumer loan for $35,000, the second file includes a consumer loan of $25,000, and the third file includes a business loan for $50,000. To which credit file does the coverage of ECOA and Regulation B apply?
A. Only the consumer credit loan for $25,000
B. Only the consumer credit loan for $35,000
C. Only the business loan
D. All of the loans
Correct. The correct answer is d. A, B, and C are incorrect because ECOA and Regulation B apply to all types of credit.
Betsy Call is an astute businesswoman with years of retail experience. She has come to the bank to get a loan to start her own business—a “Call” Center where consumers can inquire about the best places to purchase almost anything. She has a written business plan and knows exactly how to solicit donations from participating businesses, and already has some businesses lined up. After she explained her plans to Mark, the loan officer, he told her that it was the bank’s policy to require a written application for all small business loans, and handed Betsy an application form. Then he added, “I think filling this out is a waste of time—this bank will never loan money on such a risky venture.” Has Mark declined the loan?
A. No, he is just being honest and trying manage Betsy’s expectations
B. No, because the bank requires written applications so this is not an application at this point
C. Yes, because the lender’s response to an applicant rather than written policy is what determines whether an inquiry becomes and application. Mark made a decision and communicated that decision to Betsy
D. No, because declinations must be in writing and Mark did not give Betsy a written declination
The correct answer is c. A, B, and D are incorrect because the lender’s response to an applicant rather than written policy is what determines whether an inquiry becomes and application. Mark made a decision and communicated that decision to Betsy.
Josh Johnson applied for a home equity loan at his neighborhood bank. Josh’s loan request was denied because his credit score was too low. When his bank sends Josh the Regulation B required adverse action notice, what additional information must be included in that notice?
A. The loan-to-value ratio for the property
B. The FCRA credit score disclosure
C. The referral names of two other lenders who make high risk equity loans
D. A request for a co-signer on the loan
The correct answer is b. A, C, and D are incorrect because that information would not be included in an adverse action notice
Richard Nuanes, a loan officer at Community Bank, is meeting with Louise Cooper, a retired schoolteacher. Ms. Cooper wants a loan to make repairs on her house. During the loan interview, Richard expresses concern that Ms. Cooper may not qualify for the loan based on her current income and asks if her husband can cosign the loan. He asks if she would be agreeable to a loan for a lesser amount or for a shorter term. Richard violated Regulation B during his loan interview with Ms. Cooper. Which comment was a violation?
A. Richard specified a particular person as a cosigner
B. Richard stated concerns about Ms. Cooper’s income
C. Richard made an oral counteroffer
D. Richard’s counteroffer was for a shorter term
. The correct answer is a. B is incorrect because Richard can raise concerns about income in this case because the type of income Ms. Cooper is using to apply for her loan is an allowable consideration for any loan. C is incorrect because Regulation B does not prohibit a lender from making an oral counteroffer. D is incorrect because Regulation B does not prohibit a lender from making a counteroffer for a shorter term
Mateo is a loan processor at Keyside Bank. He is handling a real estate loan request that will be secured by a first lien on the subject property. Mateo needs to provide the customer with a free written valuation of the property. Which item is considered a valuation under Reg B rules that must be provided to his customer?
A. A tax assessment list obtained from a state website
B. A document prepared by his staff that assigns value to the property
C. A manufacturers’ invoice for the manufactured home being purchased
D. A governmental agency statement of appraised value that is publically available
The correct answer is b. A, C, and D are incorrect because they are not valuations under the Reg B rules.
The correct answer is b. A, C, and D are incorrect because they are not valuations under the Reg B rules.
The correct answer is d. A is incorrect because there is no such thing as a probability system. B and C are incorrect because the bank is using a credit scoring system.
You hear a compliance officer express a concern that he may have identified a violation of the Equal Credit Opportunity Act. Based on what you know about the purpose of the Act, what is the likely focus of the compliance officer’s concern?
A. The bank needs to make it easier to get credit
B. The bank has not ensured that all credit applicants get the same loan terms
C. The bank has participated in illegal discrimination against credit applicants
D. The bank has not guaranteed credit to all applicants
The correct answer is c. A is incorrect because ECOA does not make it easier to get a loan. B is incorrect because ECOA does not ensure that applicants will get particular loan terms, only that they will be treated equally. D is incorrect because ECOA does not guarantee credit to all applicants; only that they will be treated equally.
Which option lists two circumstances under which you can consider the age of a credit applicant?
A. To determine if the applicant can legally enter into a contract and if the applicant is planning to retire during the life of the loan
B. To determine if the applicant is planning to retire during the life of the loan and the applicant’s life expectancy
C. To determine the applicant’s life expectancy and if the applicant can legally enter into a contract
D. To determine the applicant’s relative health and if the applicant is planning to retire during the life of the loan
The correct answer is a. B and C are incorrect because life expectancy is not a factor a bank may consider in determining creditworthiness. D is incorrect because the applicant’s relative health is not a factor a bank may consider in determining creditworthiness
Stacy is a loan officer at Capitol Bank. She is trying to determine which valuation must be provided to her customer, and needs your help. Which item on Stacy’s desk is a valuation that must be provided to her customer?
A. A tax assessment list obtained from a state website
B. A manufacturers’ invoice for the manufactured home being purchased
C. A document prepared by her staff that assigns value to the property
D. A governmental agency statement of appraised value that is publically available
The correct answer is c. A, B, and D are not valuations under the Reg B rules.
You hear a compliance officer express a concern that he may have identified a violation of the Equal Credit Opportunity Act. Based on what you know about the purpose of the Act, what is the likely focus of the compliance officer’s concern?
A. The bank needs to make it easier to get credit
B. The bank has not ensured that all credit applicants get the same loan terms
C. The bank has participated in illegal discrimination against credit applicants
D. The bank has not guaranteed credit to all applicants
The correct answer is c. A is incorrect because ECOA does not make it easier to get a loan. B is incorrect because ECOA does not ensure that applicants will get particular loan terms, only that they will be treated equally. D is incorrect because ECOA does not guarantee credit to all applicants; only that they will be treated equally.
Over the past month, National Bank has participated in several credit activities. Specifically, it has 1) processed loan payments 2) filed currency transaction reports 3) determined credit evaluation criteria 4) sent thank you letters. Which option correctly lists an activity that is covered by ECOA?
A. Filing currency transaction reports
B. Sending thank you letters
C. Processing loan payments
D. Determining credit evaluation criteria
The correct answer is d. A, B, and C are incorrect because none of these are activities covered by ECOA.
When Makeda graduated from college, she applied for a loan and told Brian, the loan officer, that she had been discriminated against at another bank because of her race and had filed suit against that bank and won. Brian declined Makeda’s request for credit because he did not think the bank should have to do business with someone who goes around suing banks. Which one of the nine prohibited factors did Brian violate?
A. Age—she just graduated from college
B. Race—she is a minority
C. Sex—she is a female
D. Exercise of her rights under the Consumer Credit Protection Act
The correct answer is d. A, B, and C are incorrect as it is not evident from the scenario that Brian discriminated based on any of these factors.
