Equal Credit Opportunity Act / Fair Lending (Reg B)

Question 1

First National Bank charges consumers for the cost of pulling a credit bureau report for all consumer closed-end mortgage loans. The fee of $24 is assessed at the time an application is received. This practice is:

A. Permitted, provided the fee is bona fide and reasonable
B. Not permitted, unless consumers have been given written estimated loan disclosures and indicated an intent to proceed
C. Not permitted, unless at least three business days have lapsed since the application was received by the creditor
D. Permitted, provided the fee is charged to all applicants and nonrefundable

Answer 1

A. Permitted, provided the fee is bona fide and reasonable

There are no regulatory restrictions against assessing the credit report fee to the customer for consumer-purpose closed-end mortgage loans if it is bona fide and reasonable. Written loan estimate disclosures are not required in order to assess the fee, nor must 3 business days elapse. Finally, there is no requirement that the fee be charged to everyone and be nonrefundable.

Question 2

To ensure that your institution’s policies and procedures are in compliance with Regulation B and its requirements relating to spousal signatures, which of the following is the MOST effective action you, as the compliance officer, should take?

A. Research state signature requirements in all states in which customers could reside or own property and prepare a legal brief for management on the findings
B. Ensure that the institution adopts a continuing guarantee for all commercial loans
C. Review customer complaints relating to spousal signatures in the lending department
D. Provide periodic training on spousal signature requirements of Regulation B to lending staff

Answer 2

D. Provide periodic training on spousal signature requirements of Regulation B to lending staff

Question 3

Anywhere Bank wants to introduce relationship pricing with reduced loan rates for customers with higher deposit balances. Does this practice present any fair lending concerns to the bank?

A. No, if the pricing standard is set forth in the bank’s credit policy
B. No, if the pricing is justified by competitive analysis
C. Yes, there is a potential for disparate impact if the majority of the bank’s higher deposit balance customers are all white males
D. Yes, since providing lower rates for some borrowers but not others is illegal overt discrimination under Regulation B

Answer 3

C. Yes, there is a potential for disparate impact if the majority of the bank’s higher deposit balance customers are all white males

While this is an allowable practice, it does not come without fair lending risk. This fair lending risk must be identified and monitored. There is potential for disparate impact if the bank discovers that mostly white males are benefitting from advantageous pricing on loans due to high account balances. Since there is fair lending risk in this practice, answers A and B are incorrect; providing these standards in credit policy does not eliminate fair lending risk, nor does any sort of justification from competitive analysis. There is no disparate treatment here since pricing is based on account balances, not any sort of intentional discriminatory activities on the part of the lender.

Question 4

An internal fair lending review indicated no evidence of overt discriminatory practices. However, 60% of the unsecured loans approved to male applicants were charged loan fees that were lower than the bank’s policy, and only 10% of the female applicants received reduced loan fees. There was insufficient documentation in the credit files to justify these pricing differences. The MOST appropriate action the compliance officer should take is to:

A. Note the event, but indicate that no overt discrimination was found
B. Conduct a complete demographic and regression analysis to determine the full extent of this fair lending issue
C. Develop specific policy provisions for fee exception approvals and documentation, and retrain lending personnel
D. Anticipate a referral to the Department of Justice on the next regulatory exam due to inconsistent application of loan policy that has resulted in disparate impact

Answer 4

C. Develop specific policy provisions for fee exception approvals and documentation, and retrain lending personnel

Differences in fee reductions on the basis of sex is a clear fair lending risk, especially without clear documentation as to the rationale for the disparity. This is a risk whether or not there is an explicit policy on the issue, or whether an explicit discriminatory preference was stated. Demographic and regression analyses, while useful, are reflective of past issues and do not do an effective job, right now, of reducing that risk. And hopefully the bank would not expect a DOJ referral on this issue; but even if this happens, it is not the most appropriate action for the bank to take. Developing and implementing controls over the inconsistent application of fees is the most appropriate way for the bank to reduce its fair lending risk.

Question 5

Which is a mitigating factor when reviewing for fair lending risk?

A. Pricing exceptions are allowed for the first 100 lender requests each month
B. Marketing is limited to internet ads that appear during housing market searches
C. Underwriting has a “no exceptions” policy, and a report is run weekly to confirm
D. Servicing considers customer loan modification requests on a case-by-case basis

Answer 5

C. Underwriting has a “no exceptions” policy, and a report is run weekly to confirm

A mitigating factor for fair lending risk would be a factor that reduces the degree of risk. A “no exceptions” policy for underwriting, with weekly reports to confirm, is a solid factor to reduce fair lending risk in the lending process. Allowing exceptions for the first 100 requests only limits risk for those first 100, and thus is not as effective a mitigating factor. Limiting marketing to only housing searches does not appreciably reduce fair lending risk, and case-by-case consideration of modification requests would not reduce fair lending risk. On the contrary, it would increase it.

Question 6

When monitoring a bank’s fair lending compliance, which of the following is LEAST likely to be reviewed?

A. HMDA information
B. Adverse action letters
C. CRA disclosure statement
D. Applicant geographic locations

Answer 6

C. CRA disclosure statement

Question 7

During a review of the last exam report, the compliance professional discovers that violations have been cited with regard to requiring an applicant’s spouse to guarantee the loan. The compliance professional is asked to review the bank’s draft response and respond. What is the BEST plan of action?

A. Develop a new procedure to receive the signatures or initials on a credit application showing the applicant’s intent to apply for joint credit; form a committee to review prior loans where the spouse was required to guarantee the loan in error
B. Develop a new procedure to receive the signatures or initials on a joint financial statement showing the applicant’s intent to apply for joint credit; form a committee to review prior loans where the spouse was required to guarantee the loan in error
C. Respond that this is common practice in the banking industry and for safety and soundness reasons, the bank needs to require the spouse to guarantee the loan to prevent future losses; form a committee to review prior loans where the spouse’s signature may be required
D. State that the majority of the loans were business purpose loans and the regulation does not apply to business loans; form a committee to focus on ways to improve this process for customer loans

Answer 7

A. Develop a new procedure to receive the signatures or initials on a credit application showing the applicant’s intent to apply for joint credit; form a committee to review prior loans where the spouse was required to guarantee the loan in error

Question 8

After a review of the Equal Credit Opportunity Act (Regulation B), which finding is MOST important to discuss with the business?

A. The review verified that adverse action notices were sent in a timely manner based on the application date
B. The review indicated that some lenders are collecting marital status information on unsecured loans
C. The review confirmed that child support income is appropriately used when provided by the applicant
D. The review found no evidence of disparate impact in any policies or procedures

Answer 8

B. The review indicated that some lenders are collecting marital status information on unsecured loans

The only choice that is non-compliant with Regulation B is the collection of marital status information on unsecured loans, which is not permitted. (It is not permitted under HMDA, either). Each of the other choices demonstrates compliance with Regulation B requirements.

A bank may never require information on the spouse, unless the spouse will be using or contractually liable on the account, the applicant is relying on the spouse’s income (such as relying on the spouse for alimony, child support or separate maintenance payments), or the applicant resides in a community property state. Additionally, a bank may not require that a spouse co-sign an application when the other spouse qualifies individually for the credit. Even if the initial spouse does not qualify individually for a credit extension, the bank may not require that the spouse be a co-signer.

Question 9

Which action on the part of the loan officer might be the basis for a violation of the Equal Credit Opportunity Act?

A. Not having a branch open on Saturdays
B. Failing to stand and shake the applicant’s hand
C. Requiring all applications to be submitted in writing
D. Establishing a minimum income amount of $30,000

Answer 9

D. Establishing a minimum income amount of $30,000

Question 10

What is the adverse action timing requirement for a completed application?

Answer 10

30 days after receipt

Question 11

What is the adverse action timing requirement for an incomplete application?

Answer 11

30 days after receipt. (Alternatively if the application is denied because of incompleteness, the creditor may give an NOI)

Question 12

What is the adverse action timing requirement for an existing account?

Answer 12

30 days

Question 13

What is the adverse action timing requirement for a counteroffer?

Answer 13

90 days, if not expressly accepted (NOTE: CO doesn’t need to be open for 90 days.)

Question 14

What are the notice requirements for withdrawn applications?

Answer 14

No notice need be sent. An application is withdrawn if the applicant expressly withdraws it or if the lender approves the application and expects the applicant to contact the lender about status and the applicant failed to do so.

Question 15

For businesses with gross revenues of $1 million or less in the preceding fiscal year, does the creditor have to provide an adverse action notice?

Answer 15

Yes, but the statement of action may be given orally or in writing. If done orally, the creditor must also disclose the applicant’s right to have reasons for denial confirmed in writing within 30 days of a written request for confirmation.

Question 16

For businesses with gross revenues of $1 million or less in the preceding fiscal year, does the creditor have to provide the applicant with the specific reasons for adverse action?

Answer 16

Yes, but the creditor may disclose that they have the right to request the specific reasons for AA at the time of application, if it is writing and also contains the ECOA notice.

Question 17

For businesses with gross revenues of $1 million or less in the preceding fiscal year, if the application was taken by phone, does the creditor have to provide an adverse action notice?

Answer 17

Yes, but if the application was taken by phone, the adverse action may be oral, so long as the applicant also receives a right to a statement of reasons orally too.

Question 18

For businesses with gross revenues of $1 million or more in the preceding fiscal year, how must the creditor provide adverse action?

Answer 18

Orally or in writing, within a reasonable period of time of the action taken.

Question 19

For businesses with gross revenues of $1 million or more in the preceding fiscal year, what are the creditor’s responsibilities for delivering a statement of specific reasons and the ECOA notice?

Answer 19

The creditor must provide it in writing if the applicant makes a written request within 60 days of being notified of AA.

Question 20

What is the Notice of Incompleteness timing requirement?

Answer 20

Must send within 30 days of receipt of an incomplete application.

Question 21

If an NOI is provided to the applicant, what is the creditor’s responsibility if the applicant fails to respond?

Answer 21

No further obligation

Question 22

If an NOI is provided to the applicant, what is the creditor’s responsibility if the applicant provides the missing information?

Answer 22

The creditor has 30 days to provide an approval, counteroffer or decline.

Question 23

What is the definition of an application?

Answer 23

An oral or written request for credit.

Info entered into and retained by a computer system qualifies as a written application.

Question 24

T/F: A pre-approval request is not an application.

Answer 24

False

Question 25

When are written applications required?

Answer 25

Purchase or refinance of a principal dwelling and secured by a principal dwelling.

Question 26

When is GMI required?

Answer 26

Purchasing or refinancing a principal dwelling that’s also secured by a principal dwelling.
*This also includes mobile homes.

Question 27

What information is collected for GMI?

Answer 27

Ethnicity and race
Sex
Marital status
Age

Question 28

We may collect GMI on these other types of loans for self-testing, but it’s not required.

Answer 28

Non-mortgage applications

Question 29

What are the 9 points of prohibited bases?

Answer 29

Race
Sex
Color
Religion
Exercise of rights under the Consumer Credit Protection Act
Age
Marital Status
Income
National origin

Question 30

When are creditors required to provide appraisals on applications?

Answer 30

Any application for credit that is to be secured by a first lien on a dwelling.

Question 31

When must a creditor deliver appraisals to an applicant?

Answer 31

Whichever is earlier, promptly upon completion within 3 business days prior to consummation (CE) or account opening (OE).

Question 32

Can an applicant waive the appraisal requirements?

Answer 32

No but the applicant can waive the TIMING requirement and agree to receive a copy at or before consummation or account opening.

Question 33

What are the appraisal waiving requirements?

Answer 33

Waivers must be in writing and must be received at least 3 days prior to consummation.

*If not consummated, the creditor must provide the appraisal within 30 days.

Question 34

What are the delivery and timing requirements for “Applicant’s Right to Receive Copy of Appraisal?”

Answer 34

Mail or deliver not later than the third business day after application.

Question 35

Does a creditor have to provide “Applicant’s Right to Receive Copy of Appraisal” disclosure for all applicants on an application?

Answer 35

No. Only one disclosure is required when there are multiple applicants (the primary applicant if that information is readily apparent).

Question 36

What are the cost/fee limitations for appraisals?

Answer 36

The creditor may not charge the applicant for copies, but may charge for the reasonable costs of obtaining the appraisal or evaluation.

Question 37

What are the retention requirements for applications?

Answer 37

25 months

Business (gross rev $1 million or less) 12 months
Business (gross rev $1 million or more) 60 days unless requests specific reasons for action taken, then 12 months.

Question 38

What are the four permissible exceptions when requesting a spouse or former spouse on a credit application?

Answer 38

• If the spouse will be permitted to use the account or will be contractually liable
• The applicant is relying on spouse’s income, alimony, child support, etc.
• The applicant resides in a community property state
• The property securing the credit is in a community property state

Question 39

When is it permissible to request marital status on a credit application? What can a creditor ask?

Answer 39

If the application is for individual, unsecured credit.

The creditor may ask: married, unmarried or separated.

Question 40

When is it permissible to ask about age on a credit application?

Answer 40

• old enough to legally enter into a contract.
• may favorably consider applicants who are “elderly” (age 62+)
• judgmental credit evaluation systems may consider age as it relates to other pertinent elements of creditworthiness (e.g., age as it relates to income for repayment considerations, like retirement)
• predictor credit scoring systems (e.g., CRIF). Takes away the human element.

Question 41

When is it permissible to ask about protected income on a credit application?

Answer 41

• may consider public assistance income as it relates to another pertinent element of creditworthiness.
• may consider length of time it will be received, continued qualification and whether or not it can be garnished.

Question 42

What protected income may not be discounted or refused in connection with a credit application?

Answer 42

Part time income, annuities, pensions, retirement benefits, alimony, child support and separate maintenance payments (to the extent they are likely to be consistently made).

Question 43

Which of the following actions are NOT an adverse action?

A. Refusal to grant credit on substantially the same terms and conditions as requested by the applicant.
B. Termination of an account.
C. Refusal to grant credit on the grounds that the lender does not offer the type of credit requested.
D. Refusal to increase the amount of credit on an existing account after a request.

Answer 43

C. Refusal to grant credit on the grounds that the lender does not offer the type of credit requested.

If the creditor does not offer the type of credit requested by the applicant, the denial of the request is not an adverse action.

Question 44

Which of the following statements regarding applications is correct?

A. Applications must be signed to be valid.
B. Creditors may accept oral applications.
C. Creditors may not develop their own definition for a completed application.
D. A creditor is not required to attempt to complete incomplete applications.

Answer 44

B. Creditors may accept oral applications.

A creditor may set its own procedures for accepting applications. If the creditor makes a policy that no oral applications will be accepting and, in actual practice, accepts no oral applications, the creditor is in compliance with 1002.2(f) of Reg B.

Question 45

For what do ECOA and Reg B extend coverage?

A. All types of credit.
B. Only consumer credit.
C. Only consumer credit of $25,000 or less.
D. Only consumer and business credit with gross revenues of $1 million or less.

Answer 45

A. All types of credit.

The prohibition against discrimination in the ECOA and Reg B applies to all types of credit regardless of the borrower, amount, or purpose. Certain adverse action notification requirements apply only to credit to consumers for personal, family or household purposes and to extended to business that have $1 million or les sin gross revenues.

Question 46

Robin Martin made an individual application to the bank for a car loan. She has just returned to work on a regular basis because she was a full-time homemaker until recently, when her last child entered school. The loan officer would like to ask her about her husband. Under what circumstances can the officer ask Robin about her husband?

A. The creditor believes the spouse’s signature will make the applicant more creditworthy.
B. The applicant is married.
C. The applicant resides in a community property state.
D. The applicant’s credit reports indicate that the spouse is a better credit risk.

Answer 46

C. The applicant resides in a community property state.

The creditor can’t ask questions about a spouse unless the applicant lives in a community property state or is relying on property located in a community property state. If the applicant does not qualify for credit, the creditor may require a cosigner or guarantor but must leave the choice of the person up to the applicant.

Question 47

Bob Richardson has three loan applicants this morning:

• Heather Smith, age 17, who needs a car loan for $9,500 for 3 years
• John Bako, age 42, who would like a stock loan for $15,000 for 1 year
• Maynard Williams, age 70, recently retired, who needs a $50,000 home improvement loan for 12 years.

Bob’s bank uses a judgmental credit evaluation system. For which of these applications is Bob able to consider age of the applicant as a factor in the decision making process?

A. All of them.
B. None of them.
C. Only Mr. Williams.
D. Mr. Williams and Ms. Smith.

Answer 47

D. Mr. Williams and Ms. Smith.

The creditor may consider Ms. Smith’s age to determine whether she has the capacity to enter into a contract. The creditor may consider Mr. William’s age as it relates to another pertinent element of creditworthiness, namely, the continuation of income throughout the loan term.

Question 48

What may a creditor do if an applicant applies for individual unsecured credit?

A. A creditor may never require the signature of another person.
B. A creditor may ask for the signature of the applicant’s spouse if the applicant is not creditworthy.
C. A creditor may require another signature if the applicant relies on jointly owned property to establish creditworthiness.
D. A creditor may ask the applicant to withdraw the application if it does not meet the creditor’s credit standards.

Answer 48

C. A creditor may require another signature if the applicant relies on jointly owned property to establish creditworthiness.

In a request for unsecured individual credit, the creditor should never ask for the signature of another person unless the applicant is relying on property that is jointly owned by another person, the person does not qualify without a guarantor, or the applicant lives in a community property state. However, the signature of another can be required only on instruments necessary to allow the creditor access to the property under state law.

Question 49

Cassandra Phillips requested a loan to purchase a boat. She asked for $15,000 at 7.5% for 7 years. The bank considered her request but decided, considering her income and credit history, the best offer of credit the bank could make was $10,000 at 8.25% for 5 years. Rhonda Mays, the loan officer, wrote a letter, setting forth the terms the bank could offer. The letter was mailed on July 1. Ms. Phillips received the letter and began to look elsewhere for a loan on the terms and conditions she wanted. Does the bank have any additional responsibility to Ms. Phillips?

A. No. Because the bank made the offer of a loan, there is no further responsibility.
B. No. Because the customer decided to look elsewhere, there is no further responsibility.
C. Yes. The bank must follow up with a phone call to determine if Ms. Phillips is still interested.
D. Yes. The bank must send an adverse action notice because Ms. Phillips did not take the bank’s counteroffer.

Answer 49

D. Yes. The bank must send an adverse action notice because Ms. Phillips did not take the bank’s counteroffer.

A creditor must send an AAN within 90 days after notifying the applicant of a CO if the applicant does not expressly accept or use the credit offered. However, a creditor that gives the applicant a combined CO and AAN need not send a second AAN if the applicant does not accept the CO.

Question 50

What may a creditor do in response to an application for credit from a business with gross revenues of $1 million or less?

A. Give a disclosure of the applicant’s right to receive a statement of reasons at the time of the application instead of at the time of adverse action.
B. Mention adverse action notices only if requested by the applicant.
C. Omit the ECOA statement on all notices
D. Provide only the ECOA statement to the applicant.

Answer 50

A. Give a disclosure of the applicant’s right to receive a statement of reasons at the time of the application instead of at the time of adverse action.

When notifying business applicants with gross revenues of $1 million or less, the creditor may give a disclosures at the time of application or at the time of adverse action. The statement may be oral or in writing, and the ECOA notice does not have to be given if the application is made by telephone and the notice of adverse action is oral.

Question 51

What may a creditor do when furnishing credit information?

A. May designate accounts in any manner that is convenient and reasonable.
B. Must designated accounts as specified by the parties.
C. Must designate accounts to show participation by both spouses if both are liable.
D. Must designate accounts to show all parties, including guarantors.

Answer 51

C. Must designate accounts to show participation by both spouses if both are liable.

A creditor must designate accounts to show participation by all liable parties except that guarantors do not have to be designated.

Question 52

ABC Bank has an interactive Internet Web site at which it takes consumer credit applications. At the time an applicant completes an application on the Web site and submits it, the applicant also is asked for his or her email address. If the application is denied, ABS sends the adverse action notice to the applicant’s email address listed on the application. Using this procedures, what is ABC Bank’s responsibility.

A. Post the notice on its Web site also
B. Send a paper notice by regular mail also
C. Use a credit scoring system
D. Obtain the applicant’s affirmative consent before sending the notice.

Answer 52

D. Obtain the applicant’s affirmative consent before sending the notice.

Question 53

ACME Bank is a state nonmember bank with all of its offices in one state. However, it also has an Internet We site where it advertises consumer credit and accepts applications from a five-state regional area. Two of the states are community property states. The other three are not. What is the best explanation for what ACME bank’s management should do to comply with the FDIC ECOA spousal signature guidance.

A. Because ACME has all of its offices within one state, it only has to be knowledgeable of the legal requirements of the state regarding spousal property rights and can apply those laws to all of its operations.
B. ACME must become familiar with the laws of each of the five states and ask for spouse signatures only when appropriate under law.
C. ACME can choose any of the state laws where it operates to apply to its consumer lending operations.
D. ACME should make only business-purpose loans to avoid the spousal signature rules.

Answer 53

B. ACME must become familiar with the laws of each of the five states and ask for spouse signatures only when appropriate under law.

Question 54

Hector Martinez is a loan officer in a non-community property state. He receives a verbal request for a small business working capital loan from Leon Rogers for his technology consulting business. The business is a sole proprietorship. Mr. Rogers gives Hector a written business plan for his business, a financial statement for the business for the past two years, and a personal financial statement that includes information on himself and his wife. Can Hector assume that the application is a joint application from Mr. Rogers and his wife?

A. Yes. Because the financial statement is signed by both Mr. and Mrs. Rogers and includes joint information, the application can be considered to be from both spouses.
B. Yes. Because the business is a sole proprietorship, the spouse’s financial information is important.
C. No. The bank cannot assume the application is a joint one simply on the basis of submission of joint financial information.
D. No. Because the business is a sole proprietorship, the bank should assume the application is for individual credit.

Answer 54

C. No. The bank cannot assume the application is a joint one simply on the basis of submission of joint financial information.

Question 55

Reg B defines “elderly” as having attained an age of how many years?

Answer 55

62

Question 56

When helping a loan officer determine whether the bank must give a written AAN to a business loan applicant, what shoudl the compliance officer consider?

A. Current net income
B. Gross revenue for the preceding fiscal year
C. Length of time the applicant has been in business
D. Type of business entity (that is, corporation, partnership, or sole prop)

Answer 56

B. Gross revenue for the preceding fiscal year

Question 57

Which of the following describes the record retention requirements under Reg B for a credit application for a business with annual gross revenues in excess of $1 million?

A. The bank must retain records for 30 days; however, if a written statement of action is requested, the bank must retain the records for 90 days.
B. After 6 months, the bank must dispose of the applications and records in accordance with waste disposal rules promulgated by the EPA.
C. The bank must retain records for 12 months if a written statement of adverse action is requested within 60 days after notifying the applicant of the action taken.
D. The bank must retain records for 25 months from the date of application.

Answer 57

C. The bank must retain records for 12 months if a written statement of adverse action is requested within 60 days after notifying the applicant of the action taken.

This shorter retention is required only for business purpose applicants.

Question 58

What is the signature requirement exception to Reg B? (hint: unsecured credit)

Answer 58

On unsecured loans, if the applicant is married and resides in a community property state or property on which the applicant relies is in a community property state, creditor may NOT require the spouse to sign any document unless it is necessary to make the community property available in the even of default if:

1) state law denies the applicant the power to manage or control enough community property to qualify.
2) applicant doesn’t have enough separate property to qualify.

Question 59

T/F: If the applicant requests secured credit, the creditor may require the spouse’s signature on any document necessary to make collateral available in the event of default.

Answer 59

True. This is an exception under Reg B for signature requirements.

Question 60

T/F: If the applicant relies on property owned with another person, creditor may require the signature of the other person only on instruments necessary to allow the creditor to reach the property.

Answer 60

True. This is an exception under Reg B for signature requirements.

Question 61

T/F: The creditor may require the signature of any person on instruments necessary to make secured property available to the creditor on default.

Answer 61

True. This is an exception under Reg B for signature requirements.

Question 62

Are business-purpose loans subject to the same spousal signature rules regarding requiring the signature of the spouses of officers, directors & shareholders?

Answer 62

Y

Question 63

What is special-purpose credit, as defined by Reg. B?

Answer 63

Any credit assistance program for the benefit of an economically-disadvantaged class of persons.

Question 64

Can a lender avoid taking applications or approving credit solely because a person has a fraudulent alert on their credit report?

Answer 64

No, because this is a prohibited basis. The person exercised their right under the consumer credit protection act by placing a credit alert. Discriminating against them is a violation of ECOA.

Question 65

What is overt discrimination?

Answer 65

obvious discrimination

Question 66

What is disparate treatment?

Answer 66

Treating a member of a protected class differently because of their membership to that class.

Question 67

What is disparate impact?

Answer 67

The application of an otherwise neutral policy or procedure that has a disproportionate impact on a protected class.

Question 68

What is the difference between a co-signer and guarantor?

Answer 68

Co-signer means guarantor in Reg B.

Question 69

Why do you have to have a written application for the purchase or refinance of a primary residence (ans secured by it)?

Answer 69

The application must be in writing because we have to collect GMI.

Question 70

The self test privilege under Regulation B applies to:

A. The methodology used in the self test
B. The time period covered by the self test
C. Summaries of the self test results provided to third parties
D. Factual information created by the self test

Answer 70

C. Summaries of the self test results provided to third parties

Question 71

Which of the following is an example of overt evidence of disparate treatment under fair lending laws?

A. Offering credit cards with a limit of up to $750 for applicants aged 21 to 30 and up to $1,500 for applicants over 30
B. Having a fair lending training program that is only required for new employees
C. Marketing of credit products only to existing deposit customers
D. Requiring a minimum credit score of 620 for approval of consumer installment loans

Answer 71

A. Offering credit cards with a limit of up to $750 for applicants aged 21 to 30 and up to $1,500 for applicants over 30

Question 72

Which credit application practice is a violation of Regulation B?

A. Asking, without limitation, for income from alimony or child support
B. Requesting applicant race and sex, with the appropriate disclosure, on a mortgage application
C. Requesting information, with no additional disclosure, about dependents on an auto loan application
D. Stating during the application process that the bank offers lower loan fees for applicants over age 62

Answer 72

A. Asking, without limitation, for income from alimony or child support

Question 73

Which types of loan requests require written applications pursuant to Regulation B?

A. All loan applications
B. Any application by a minor under state law
C. Any application to purchase or refinance a principal residence secured by the dwelling
D. Any application for a small business or small farm loan covered by CRA data collection

Answer 73

C. Any application to purchase or refinance a principal residence secured by the dwelling

Only certain types of loans require a written application:
1. Purpose of the loan is the purchase or refinance of the borrower’s primary residence (and secured by it)
2. Collection of government monitoring information (GMI)

Question 74

Which credit application practice is a violation of Regulation B?

A. Asking, without limitation, for income from alimony or child support
B. Requesting applicant race and sex, with the appropriate disclosure, on a mortgage application
C. Requesting information, with no additional disclosure, about dependents on an auto loan application
D. Stating during the application process that the bank offers lower loan fees for applicants over age 62

Answer 74

A. Asking, without limitation, for income from alimony or child support

A bank may ask if an applicant is receiving alimony, child support, or separate maintenance payments. However, the bank must first disclose to the applicant that such income need not be revealed unless the applicant wishes to rely on that income in the determination of creditworthiness.

Question 75

Which types of loan requests require written applications pursuant to Regulation B?

A. All loan applications
B. Any application by a minor under state law
C. Any application to purchase or refinance a principal residence secured by the dwelling
D. Any application for a small business or small farm loan covered by CRA data collection

Answer 75

C. Any application to purchase or refinance a principal residence secured by the dwelling

Question 76

In the notice-of-action-taken process, which is allowed only when a loan is denied to a small business?

A. Notification in 30 days
B. Notice of antidiscrimination
C. Name and address of the regulator
D. Statement of how to obtain the reasons for denial

Answer 76

D. Statement of how to obtain the reasons for denial

Question 77

In your fair lending self-monitoring program, you found a prohibited basis that would result in a regulatory violation was factored into the credit score. You should instruct management to FIRST:

A. Order an immediate stop to making loans
B. Suspend the use of the credit scoring system until it can be corrected
C. Contact all affected denied applicants regarding the potential unfair treatment and ask them to re-apply
D. Rewrite the applicable policies and procedures to include a second review program to provide an independent evaluation

Answer 77

B. Suspend the use of the credit scoring system until it can be corrected