FCRA

Question 1

Employers sometimes wish to use consumer reports based on personal interviews with neighbors, friends, and associates of the person. What are those reports called?

A. Inquisitive Consumer Reports

B. Undercover Consumer reports

C. Exploratory Consumer Reports

D. Investigative Consumer Reports

Answer 1

The correct answer is d. A, B, and C are incorrect because they are not investigative consumer reports which have additional obligations under the FCRA.

Question 2

Bretta applied for a teller position and the bank informed her that they would obtain a consumer report. Before the bank rejected her application, they gave her a copy of the consumer report the bank relied on to make its decision with a copy of ‘‘A Summary of Your Consumer Rights Under the Fair Credit Reporting Act.’’ Why did Brett receive this information?

A. It lets Bretta know that the bank was on to her, so she need not disagree with the decision

B. It lets Bretta know not to bother applying with the bank for credit

C. It provides Bretta the opportunity to review the report in advance and advise the bank if it was inaccurate

D. It allows Bretta to obtain a free copy of her consumer report, otherwise there would be a charge for it

Answer 2

The correct answer is c. A, B, and D are incorrect because, providing the individual with the consumer report and notice allows them to dispute incorrect information in regard to an employment decision based on inaccurate consumer report data.

Question 3

Walt is new to Human Resources and has been told he needs to obtain a consumer report on the four individuals sitting in the waiting area outside his office. They are Cady, who is applying for an open teller position; Henry, who is applying for a promotion from CSR to Branch Manager; Luke, a teller who has is suspected of theft; and Bo, who has asked to be reassigned to a different branch closer to home. Walt is unsure of the circumstances in which he does not need to obtain written permission. What would you advise Walt?

A. He does not need to obtain written permission from Cady

B. He does not need to obtain written permission from Luke

C. He does not need to obtain written permission from Henry

D. He does not need to obtain written permission from Bo

Answer 3

The correct answer is b. A, C, and D are incorrect because the employer does not need permission to obtain a consumer report on an employee if that employee is suspected of misconduct relating to employment or violating the law, rules of self-regulatory organization, or the bank’s written rules or policies.

Question 4

The Fair Credit Reporting Act (FCRA) has certain requirements when an employer, such as a bank, uses a consumer report to determine whether an applicant should be hired. Which statement correctly identifies the bank’s requirement?

A. The employer must notify consumers if the bank takes adverse action that is based in whole or in part on information contained in a consumer report

B. The employer must orally disclose to the applicant that a consumer report may be used

C. The employer does not require the applicant’s written authorization to obtain a consumer report

D. The employer need only provide a copy of the consumer report to the applicant before taking adverse action

Answer 4

The correct answer is a. B is incorrect because this disclosure must be written. C is incorrect because a written authorization is required from the consumer. D is incorrect because a notice regarding consumer rights must also be provided.

Question 5

When you use consumer reports to make employment decisions, including hiring, retention, promotion or reassignment, you must comply with the Fair Credit Reporting Act (FCRA). Which statement identifies an important facet of FCRA compliance as it applies to employment?

A. Provide an ECOA (Regulation B) adverse action notice if you decline the applicant based on his or her consumer report

B. Provide an oral notice to applicants that you might use information in their consumer report for decisions related to their employment

C. Certify compliance to the company from which you are getting the applicant or employee’s information. You must certify that you complied with all of the FCRA requirements

D. Remind applicants that the information you obtain may be used to discriminate against the applicant

Answer 5

The correct answer is c. A is incorrect because the FCRA adverse action notice is required. B is incorrect because the notice must be in writing. D is incorrect because the bank must certify that the information will not be used to discriminate.

Question 6

Employers sometimes wish to use consumer reports based on personal interviews with neighbors, friends, and associates of the person. What are those reports called?

A. Inquisitive Consumer Reports

B. Undercover Consumer reports

C. Exploratory Consumer Reports

D. Investigative Consumer Reports

Answer 6

The correct answer is d. A, B, and C are incorrect because they are not investigative consumer reports which have additional obligations under the FCRA.

Question 7

Bretta applied for a teller position and the bank informed her that they would obtain a consumer report. Before the bank rejected her application, they gave her a copy of the consumer report the bank relied on to make its decision with a copy of ‘‘A Summary of Your Consumer Rights Under the Fair Credit Reporting Act.’’ Why did Brett receive this information?

A. It lets Bretta know that the bank was on to her, so she need not disagree with the decision

B. It lets Bretta know not to bother applying with the bank for credit

C. It provides Bretta the opportunity to review the report in advance and advise the bank if it was inaccurate

D. It allows Bretta to obtain a free copy of her consumer report, otherwise there would be a charge for it

Answer 7

The correct answer is c. A, B, and D are incorrect because, providing the individual with the consumer report and notice allows them to dispute incorrect information in regard to an employment decision based on inaccurate consumer report data.

Question 8

Walt is new to Human Resources and has been told he needs to obtain a consumer report on the four individuals sitting in the waiting area outside his office. They are Cady, who is applying for an open teller position; Henry, who is applying for a promotion from CSR to Branch Manager; Luke, a teller who has is suspected of theft; and Bo, who has asked to be reassigned to a different branch closer to home. Walt is unsure of the circumstances in which he does not need to obtain written permission. What would you advise Walt?

A. He does not need to obtain written permission from Cady

B. He does not need to obtain written permission from Luke

C. He does not need to obtain written permission from Henry

D. He does not need to obtain written permission from Bo

Answer 8

The correct answer is b. A, C, and D are incorrect because the employer does not need permission to obtain a consumer report on an employee if that employee is suspected of misconduct relating to employment or violating the law, rules of self-regulatory organization, or the bank’s written rules or policies.

Question 9

The Fair Credit Reporting Act (FCRA) has certain requirements when an employer, such as a bank, uses a consumer report to determine whether an applicant should be hired. Which statement correctly identifies the bank’s requirement?

A. The employer must notify consumers if the bank takes adverse action that is based in whole or in part on information contained in a consumer report

B. The employer must orally disclose to the applicant that a consumer report may be used

C. The employer does not require the applicant’s written authorization to obtain a consumer report

D. The employer need only provide a copy of the consumer report to the applicant before taking adverse action

Answer 9

The correct answer is a. B is incorrect because this disclosure must be written. C is incorrect because a written authorization is required from the consumer. D is incorrect because a notice regarding consumer rights must also be provided.

Question 10

When you use consumer reports to make employment decisions, including hiring, retention, promotion or reassignment, you must comply with the Fair Credit Reporting Act (FCRA). Which statement identifies an important facet of FCRA compliance as it applies to employment?

A. Provide an ECOA (Regulation B) adverse action notice if you decline the applicant based on his or her consumer report

B. Provide an oral notice to applicants that you might use information in their consumer report for decisions related to their employment

C. Certify compliance to the company from which you are getting the applicant or employee’s information. You must certify that you complied with all of the FCRA requirements

D. Remind applicants that the information you obtain may be used to discriminate against the applicant

Answer 10

The correct answer is c. A is incorrect because the FCRA adverse action notice is required. B is incorrect because the notice must be in writing. D is incorrect because the bank must certify that the information will not be used to discriminate.

Question 11

Harriet works in the bank’s marketing department and has developed a list of criteria to present to a consumer reporting agency to make a credit card offer to prospective customers. Which option describes the process Harriet is working on?

A. Preapproval

B. Permissible purpose

C. Prescreening

D. Preferential treatment

Answer 11

The correct answer is c. A, B, and D are incorrect because they do not define a process between a bank and a consumer reporting agency.

Question 12

. Cardi Bank established a minimum income requirement of $75,000 as part of its eligibility criteria for its prescreened offer of an unsecured line of credit. Jose received the offer, but his application indicates his income is $50,000 a year. Can the bank decline Jose’s request?

A. No, unless the information was part of the criteria submitted to the credit bureau, it cannot be used as a basis for denial

B. Yes, because Jose clearly should not have an unsecured line of credit

C. No, Because Jose applied in good faith and the bank must make some kind of offer

D. Yes, because consumer reports do not contain certain information such as income, but it is part of determining creditworthiness

Answer 12

The correct answer is d. A, B and C are incorrect because a financial institution may use information from the application to deny the application, so long as the type of information in the application is identified in the bank’s pre-established criteria and is relevant to eligibility.

Question 13

Immanuel is a new loan officer who has been assigned several tasks related to the bank’s new marketing strategy. The bank is planning to make a prescreened offer of credit for a Home Equity Line of Credit to consumers in its market area. Which action should Immanuel take first?

A. Develop a list of eligibility criteria relative to the offer

B. Contact each customer by email with an offer

C. Obtain consumer reports for each potential customer

D. Send adverse action notices to any customer who does not qualify for the offer

Answer 13

The correct answer is a. B, C, and D are incorrect because the bank must first establish the eligibility criteria to submit to the consumer reporting agency.

Question 14

Walters Bank sent a prescreened offer of credit for a HELOC to 100 consumers in its market area. Which consumer should receive a firm offer of credit?

A. Sue, who declared bankruptcy since the bank obtained the original prescreened list from the CRA

B. Barry, who continues to meet the pre-established criteria based on information from a consumer report

C. Robin, who no longer meets the pre-established criteria bearing on credit worthiness or insurability based on information in her application

D. Chris, who sold his house and no longer has any required collateral as established before compilation of the list and disclosed in the offer

Answer 14

The correct answer is b. A, C, and D are incorrect because once a financial institution receives a prescreened list, it must make a ‘‘firm offer,’’ as defined in FCRA, of credit or insurance to each person on the list.

Question 15

Gretel just received a prescreened offer of credit from a bank near her home. With the offer, she received a notice informing her of her rights. What did this notice state?

A. She is receiving the offer because she meets certain criteria and she may contact the CRA to opt-out

B. She is receiving the offer because she meets certain criteria and she must wait 90 days to contact the CRA to opt-out

C. She is receiving the offer because she meets certain criteria and she may not opt-out of these types of offers

D. She is receiving the offer and must accept the offer from the bank in order to exercise any opt-out rights going forward

Answer 15

The correct answer is a. B is incorrect because there is no waiting requirement. C is incorrect because the consumer may opt-out. D is incorrect because the consumer need not accept the offer in order to opt-out.

Question 16

First National Bank has denied a credit application from Mr. Johnson because the application scored too low on the bank’s internal credit-scoring system. Mr. Johnson’s credit report, received from a credit reporting agency, scored a four out of a possible 10. Other parts of Mr. Johnson’s application received low scores also. Which statement best describes First National’s responsibility to Mr. Johnson under the Fair Credit Reporting Act?

A. Send an adverse action notice that states the reasons the credit was denied

B. Send a notice that a credit report was used

C. Send an adverse action notice that states that a credit report was used and gives the name and address of the credit reporting agency

D. Send an adverse action notice that summarizes the information on the credit report

Answer 16

The correct answer is c. Fair Credit Reporting Act, Section 615(a) and 15 USC CH 41 1681m Outline III A and B When credit is denied based wholly or partly on information contained in a consumer report, the user of the report must advise the consumer of that fact and supply the name and address of the credit reporting agency. Under Regulation B, the adverse action notice must either give the reasons for the action or explain to the applicant that he or she has the right to request the reasons.

Question 17

First National Bank received a credit application from Lewis Nelson for a home equity loan. Bank policy prohibits originating loans to applicants that are 60 days or more past due on other obligations. Mr. Nelson indicated that he has a $75,000 loan from the Overton Cancer Center. The bank called the cancer center to check the credit history and balance on the loan. The bank discovered that Mr. Nelson is four months past due on the loan. Based on this information, the bank denied the home equity credit application to Mr. Nelson. Which statement is correct?

A. The bank’s denial, based on the information, was wrong because the fact that he had a loan from the cancer center involves medical information about the consumer.

B. The bank should not have contacted the cancer center at all because doing so involves medical information about the consumer.

C. The bank should have had disclosed on its consumer application that medically related debts do not have to be listed.

D. The bank acted correctly because it treated the applicant’s medical debt just as it would any other debt.

Answer 17

The correct answer is d. 12 CFR 41.30(d)(1); 12 CFR 1022.30(d)(1)
Outline VI E(2)(b) Using medical information in a manner that is no less favorable than it uses other forms of credit information is an exception to the general rule.

Question 18

In which of the following cases must a furnisher of consumer information investigate the dispute?

A. A dispute submitted by a credit repair company on behalf of one of the furnisher’s customers

B. A dispute submitted by one of the furnisher’s customers on a form supplied by a credit repair company

C. A dispute about a charged off loan for which the consumer refused to provide his social security number

D. A dispute about a delinquent account that has been previously submitted but upon which the furnisher took no action

Answer 18

The correct answer is d. 12 CFR 1022.43 (f) Outline VI F(4)(b) and (c) and F(5) A furnisher can consider a dispute to be a frivolous dispute if it does not include sufficient identifying information, such as a social security number, it is submitted by a credit repair company or on a form by a credit repair company. Disputes that have been submitted previously can be considered to be frivolous if the furnisher investigated the dispute when it was previously submitted.

Question 19

Friendly Service Bank has an affiliated insurance company, FSB Insurance. In which of the following cases would the consumer receiving the marketing materials have to have received the affiliate marketing opt-out opportunity?

A. Friendly Service Bank obtains credit score qualification information from FSB Insurance to identify which of the bank’s loan customers would be eligible for FSB Insurance’s products. The bank sends the qualified customers an FSB Insurance brochure.

B. Friendly Service Bank using, a city phone directory, sends a brochure containing marketing materials on its own products, as well as FSB Insurance’s products.

C. FSB Insurance receives individualized credit score information from Friendly Service Bank about the bank’s loan customers. After selecting eligible customers from the list, FSB Insurance sends a qualified list back to Friendly Service Bank who sends the FSB Insurance marketing materials to the selected bank customers.

D. Friendly Service Bank sends its own customers a marketing brochure containing information about its own loan products

Answer 19

The correct answer is c. 12 CFR 1022.21 Outline V A(4)(a) The affiliate marketing rules allow the bank to obtain selection information from an affiliate to send marketing materials to its own customers who might be eligible for the products sold by the affiliate without requiring a notice and opt out by the bank’s own customers. The bank can send information to individuals whose names are obtained on public lists without giving an opt-out notice, even if some of them happen to be customers of their affiliates. The bank can also market its own products without requiring an opt-out opportunity. However, when an affiliate, such as FSB Insurance, obtains individualized information on the bank’s customers and selects them to receive marketing materials, then the opt-out notice requirement is triggered.

Question 20

Which of the following methods is NOT valid for determining which consumer borrowers should receive a risk-based pricing notice?

A. The credit score proxy method

B. The direct comparison method

C. The tiered pricing method

D. The comparative file method

Answer 20

The correct answer is d. 12 CFR 1022.72 Outline III G(1)(c), (2) and (3) The direct comparison method is used when the lender directly compares borrowers to other similar borrowers in the portfolio to determine who receives a notice. The credit score proxy method is used when a lender derives a cutoff credit score where at least 40% of its borrowers fall above the cutoff and 60% below the cutoff. Borrowers below the cutoff receive notices. The tiered pricing method allocates notices to borrowers in the higher pricing tiers.

Question 21

Consumer reports used for credit transactions may contain which of the following items?

A. Records of bankruptcies for seven years

B. Adverse credit items for seven years and bankruptcies for 10 years

C. Records of arrests or convictions for 10 years

D. Paid tax liens for 10 years

Answer 21

The correct answer is b. Fair Credit Reporting Act, Section 605(a) and 15 USC CH 41 1681c Outline I C Bankruptcies can be reported for 10 years. All other adverse items may be reported for 7 years.

Question 22

Mrs. Williams applies to rent an apartment from Better Living Apartments. She has been a customer of First National Bank for several years, so she lists the bank as a credit reference. Better Living sends the bank a credit inquiry letter, and the bank sends Better Living a list of Mrs. Williams’s bank transactions. The report states that she has had several insufficient checks on her account over the last two months and that she has satisfactorily paid off a car loan. Better Living calls the bank and speaks to Consumer Loan Officer George Dillon. Mr. Dillon states that Mrs. Williams applied for a loan three months ago, and he denied the loan because of a slow-pay report from ABC Department Store that appeared on Mrs. Williams’s credit report. Did the bank give Better Living a consumer report under the Fair Credit Reporting Act?

A. No. Providing limited amounts of information from others will not cause the bank to be covered under the Fair Credit Reporting Act.

B. Yes. By giving deposit-related information concerning returned checks, the bank created a consumer report.

C. Yes. The bank gave credit information it received from another source.

D. No. The ABC Department Store information was part of the bank’s own experience, because it was used by the bank to make a credit decision.

Answer 22

The correct answer is c. Fair Credit Reporting Act, Section 603(d) and 15 USC CH 41 1681a Outline I A and B

Question 23

To avoid being considered a “consumer reporting agency,” the FCRA requires banks that regularly purchase dealer paper from automobile dealers to be sure that the:

A. Dealer properly discloses the reasons for a denial of credit.

B. Bank’s name does not appear on the application or on the contract signed by the customer.

C. Dealer reports to the consumer the name and address of the bank.

D. Statement of disclaimer of liability is on any application for credit purchased by the bank.

Answer 23

The correct answer is c. 15 USC Ch 41 1681a Outline I B(5) This information must be given to the consumer in order to prevent the bank from becoming a consumer reporting agency

Question 24

In which of the following circumstances is it NOT permissible for a financial institution to obtain a consumer report from a consumer reporting agency?

A. The bank requests reports on all delinquent borrowers for collection purposes

B. The bank requests prescreen lists on prospective credit card applicants to solicit credit card accounts

C. As an employee service, the bank requests credit reports on employees’ family members for the employees’ and their families’ own use

D. The bank obtains a credit report on prospective employees, with their consent, after the first interview but before the job offer

Answer 24

The correct answer is c. Fair Credit Reporting Act, Section 604 and 15 USC CH 41 1681b
Outline II
There are several permissible uses for the consumer report, including use in credit transactions (extending, reviewing, or collecting loans) and employment purposes. Providing consumer reports on family members to employees for other purposes without written permission of the person who is the subject of the report is a violation.

Question 25

A compliance officer is monitoring a financial institution’s credit reports for compliance with the Fair Credit Reporting Act requirements. Which of the following is NOT a permissible purpose for obtaining and using the consumer report?

A. Application to open a new personal deposit account

B. Annual review of a personal credit card account before issuing a renewal card

C. Review of the personal credit history of a prospective customer on whom the bank officer plans to call

D. Application for a commercial loan by an individual where the individual authorized the bank to investigate his credit history

Answer 25

The correct answer is c. 15 USC Ch 41 1681b and 604 Outline II A–F The bank cannot obtain a consumer report without a legitimate credit or employment purpose. The consumer must either apply for credit or employment, or the bank must be planning to make a firm offer of credit in order to obtain a consumer report.

Question 26

Which of the following communications is NOT a consumer report regulated by the Fair Credit Reporting Act?

A. A report telephoned by a Bank A loan officer to a Bank B loan officer, describing Bank A’s lending experience with a borrower

B. A report from a credit bureau to a bank containing general credit information on a consumer

C. A bank’s written credit reference sent to a department store as requested by the individual with bank credit file information, including other lenders’ information from a credit bureau report

D. A bank’s report to a contractor with credit information on a mutual customer, including references from retailers gathered by the bank at the customer’s request

Answer 26

The correct answer is a. Fair Credit Reporting Act, Section 603(d) and 15 USC CH 41 1681a Outline I B A consumer report does not include a report that only contains information about experiences between the person making the report and the consumer. Therefore, a bank can provide information about its own lending experience and not be covered by the Fair Credit Reporting Act.

Question 27

Mr. Hilliard applied to First National Bank for a car loan. The bank requested a credit report on Mr. Hilliard from the local credit reporting agency and found that he had almost no credit. No negative items were on the report. In addition, Mr. Hilliard had been employed at his job for four months and his previous work experience was difficult to verify. The bank denied his application for a loan and sent him an adverse action notice. What should the bank do under the Fair Credit Reporting Act?

A. Notify Mr. Hilliard that a credit report was obtained and give him the name and address of the credit bureau.

B. Nothing. The bank has no responsibilities under the Fair Credit Reporting Act because the credit report contained no adverse items.

C. In person or over the telephone, explain to Mr. Hilliard that, although the credit report had no negative items, he has too little credit history.

D. Give Mr. Hilliard a copy of the credit report.

Answer 27

The correct answer is a. Fair Credit Reporting Act, Section 615(a) and 15 USC CH41 1861m Outline III A(1) That information on the credit report was partially responsible for the credit denial gives rise to the responsibility to report it to the consumer. Even too little credit history is enough reason to report under the Fair Credit Reporting Act. In addition, under ECOA’s Regulation B, the reasons for credit denial must be provided either automatically or on request after notice of that right is provided.

Question 28

Friendly Service Bank is a new bank that will focus on offering financial services to consumers. The compliance officer needs to comply with the identity theft prevention requirements of the FACT Act. What should she do first?

A. Write a compliant policy that the board can approve

B. Establish procedures for handling address changes

C. Appoint a task force to establish compliance priorities

D. Perform a risk assessment of the bank’s risk factors for identity theft

Answer 28

The correct answer is d. 12 CFR 41.90(c),12 CFR 222.90(c), 12 CFR 334.90(c), 12 CFR 571.90(c) Outline III F(2)(a)(ii) The first step in developing an identity theft prevention program is to perform a risk assessment to determine whether the bank offers or maintains covered accounts, consider the methods used to open and provide access to accounts in order to assess the bank’s exposure to identity theft threats.