Practice Exam Flashcards
Under the Bank Protection Act, how often must a security program provide for training of officers and employees? A. Annually B. As needed C. Continually D. Initially and periodically
d
Which of the following statements describes a bank’s reporting requirements when it awards a big-screen television, valued at $800, to a customer as a grand-opening prize?
A. The prize is not reportable
B. The cost of the prize is reportable on Form 1099-INT.
C. The fair market value of the prize is reportable on Form 1099-MISC.
D. The fair market value of the prize is added to the interest paid on the customer’s account and reported on Form 1099-INT
c
Your bank has ten joint marketing agreements with non-affiliated third parties to offer additional financial products to your customers. Each of the contracts renews every two years. Prior to renewal, you should review the new contracts to determine whether ___________.
A. it would be cost-effective to offer the products directly
B. the third party has provided privacy notices to your customers
C. the products offered by the third party are competitively priced
D. the contract contains the appropriate third-party confidentiality clause
d
Regulation M covers leases for personal property ____________.
A. used in connection with a home-based business
B. in excess of $54,600, except for airplane leases
C. for personal, family, or household purposes for a period of time exceeding four months, for a total contractual amount not exceeding $54,600
D. used for agricultural purposes
c
The job responsibilities of a newly hired compliance officer include review of all bank advertising. This review has never been done before. Which of the following actions is MOST appropriate for the new compliance officer to take FIRST?
A. Discontinue all advertising and suspend payment of vendors until the review is complete.
B. Discuss the bank’s advertising philosophy with management.
C. Discuss future advertising plans with management.
D. Inform the marketing department that all current and future advertising material will be reviewed.
d
The head of the banks collections and recovery department called you to ask about a proposed process improvement that he is considering for the department. He wants to reduce the number of third party debt collectors the bank uses to collect delinquent loans and use internal bank employees to conduct collection efforts, including calling delinquent customers and sending communications requesting payments. He wants your thoughts on the Fair Debt Collection Practices Act and its implications on such a change. Your advice to the collections and recoveries manager includes:
A. The bank employees will need to be fully trained in the provisions of the Fair Debt Collection Practices Act, since it applies to their collection activities
B. Debts collected by bank employees must be collected in the name of a fictitious third party in order to protect the bank from liability
C. The Fair Debt Collection Practices Act does not apply to debts collected by bank employees, however, the employees should be trained to refrain from the unfair and abusive provisions of the Act
D. The collection process should not be brought in house because of Fair Debt Collection Practices Act restrictions
c
The bank has decided to begin offering a full range of non-deposit investment products to retail customers. Your FIRST step should be to ____________.
A. review the state insurance licensing requirements
B. develop a program to obtain Series 6 & 7 licenses for the sales staff
C. develop new account forms that include processes to determine suitability
D. review the Interagency Statement on the Retail Sale of Nondeposit Investment Products
d
The dollar amount of the application reported on the HMDA LAR should be recorded as a number that is ____________.
A. exact to ensure that the correct application can be identified at a later date
B. rounded to the nearest hundred; for example, a loan of $150,400 should be reported as $150.4
C. rounded to the nearest thousand; for example, a loan for $150,400 should be reported as $150
D. rounded up to the next thousand; for example, a loan for $150,400 should be reported as $151
c
The dollar amount of the application reported on the HMDA LAR should be recorded as a number that is ____________.
A. exact to ensure that the correct application can be identified at a later date
B. rounded to the nearest hundred; for example, a loan of $150,400 should be reported as $150.4
C. rounded to the nearest thousand; for example, a loan for $150,400 should be reported as $150
D. rounded up to the next thousand; for example, a loan for $150,400 should be reported as $151
c
Which of the following should the compliance officer accomplish FIRST to implement the information sharing provisions of the Fair Credit Reporting Act?
A. Draft a privacy policy
B. Identify the institution’s affiliates
C. Modify account holders’ agreements by adding opt-out language
D. Prepare opt-in agreements to mail to existing account holders
b
A customer who has preauthorized transfers made on the 15th of each month to the utility company, sent written notification to the bank on the 5th of the current month that he wanted to discontinue the automatic transfers. The bank received the customer’s notification on the 7th. On the 20th of the month, the customer telephoned to state that his account balance indicated that payment was NOT stopped. The bank should advise the customer that ____________.
A. the problem must be corrected by the utility company
B. the bank has no liability, but will discontinue the transfer effective as of the next billing cycle
C. federal law requires 30-day prior written notice to stop payment on preauthorized transfers
D. the account will be credited promptly
d
Under CRA rules, banks other than small banks must report which of the following types of loans?
A. Loans to small farms
B. Automobile loans secured by home equity
C. Unsecured consumer loans
D. Unsecured consumer credit card lines
a
An internal audit reveals APR calculation issues. In responding, you should FIRST ____________.
A. perform a root cause analysis
B. attend a seminar on Regulation Z
C. implement training for applicable employees
D. contact vendors regarding system enhancements
a
Which of the following is considered a non-listed business that is eligible for exemption from CTR reporting requirements? A. Pawn shop B. Auction house C. Licensed real estate broker D. Licensed pari-mutual race track
d
ABC Bank is considering offering a special loan promotion in conjunction with the local cosmetic surgeon, Dr. Tucker, PC. The banks loan application forms will be available in the doctors office and patients who want to finance cosmetic surgery procedures can arrange financing directly with the bank. Dr. Tuckers officer will refer patients to the bank and provide bank application forms upon request. The banks application forms include an authorization that the applicant signs allowing the bank to obtain information from Dr. Tuckers office as necessary to process the application for credit. Which of the following is true in connection with such applications?
A. the bank is permitted to contact the doctor’s officer to determine and verify the medical purpose of the loan
B. the bank is not permitted to contact the doctor’s office for information relating to the credit application
C. the bank is permitted to contact the doctor’s office only if the loan is approved
D. the bank is permitted to contact the doctor’s office to obtain any information about the applicant because the applicant provided the signed authorization
a
HMDA requires institutions that lose their reporting exemption status because of size or location to begin reporting by the ____________.
A. end of the calendar quarter in which the exemption is lost
B. end of the calendar year in which the exemption is lost
C. calendar year following the year in which the exemption is lost
D. calendar year following a 1-year grace period after the exemption is lost
c
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
c
A bank may provide services to a non-bank affiliate under contract for fees if ____________.
A. the contract may be cancelled at any time
B. the terms are substantially the same as those prevailing at the time for comparable non-affiliated transactions
C. the bank provides such services exclusively to the non-bank affiliate
D. prior written regulatory approval is obtained
b
The loan originators for consumer credit transactions secured by a dwelling in your institution are subject to all of the following requirements EXCEPT:
A. A criminal background check through NMLSR or law enforcement agency
B. Registration under the SAFE Act
C. Periodic training covering state and federal loan origination requirements
D. Membership in the National Mortgage Loan Originator Society (NMLOS)
d
By policy, a bank does not collect income information on employee loan applications. When completing the HMDA LAR’s income field, the bank must record the ____________.
A. Zero dollar amount
B. income information, regardless of its policy
C. income information, but may use codes to protect the employee’s identity
D. code for ‘‘not applicable’’
d
Which of the following procedures would be MOST effective in controlling the flow of information from the bank to the government in conjunction with SAR filing?
A. File SARs only after they have been reviewed by the board of directors.
B. Designate one department, such as Legal or Security, to process, review, and file SARs on behalf of the bank.
C. Allow individual branches to file SARs on behalf of the bank to ensure that filing time requirements are met.
D. Allow each business group or product group (e.g., Consumer Loans, Auto Loans) to develop and implement procedures to process, review, and file SARs related to its particular group.
b
One purpose of CRA Regulations is to ____________.
A. encourage banks to help meet the credit needs of their local community
B. require banks to satisfy all of the credit needs of their local community before they make loans elsewhere
C. require that banks increase their real estate lending
D. ensure that 51% of a bank’s real estate loans are to individuals living in low- and moderate-income neighborhoods
a
A bank is considering changing its business hours of operation. Currently, branches arre not open on Saturdays and Sundays. The bank is considering opening all branches on Saturdays from 9:00 am to 11:00 am for routine teller transactions through the drive-up windows. The loan operations manager asks the compliance manager how this change will impact the process for mailing consumer loan disclosures to customers for mortgage loans. The compliance manager responds by explaining that:
A. The change will require the bank to consider Saturday as a business day for purposes of delivering Loan Estimates to consumers after receipt of an application.
B. The change will not affect the timing of delivery of Loan Estimates to consumers after receipt of an application.
C. The change will affect the timing of delivery of Revised Loan Estimates to consumers after receipt of an application.
D. The change will require the bank to consider Saturday as a business day for purposes of the 7 day waiting period prior to loan consummation.
b
Your bank is considering closing a branch office. You should review which of the following FIRST?
A. Percentage of out-of-area deposits
B. Ratio of loans in the assessment area to total loans
C. Bank’s branch closing policy and procedures
D. How much time remains on the building lease
c
If the bank does not obtain the TIN from the deposit account holder when the account is opened, the Bank Secrecy Act requires that the bank ____________.
A. begin 28% withholding of interest
B. close the account after 30 days
C. obtain the TIN within a reasonable time after account opening
D. notify the Treasury Department of affected account information
c
During a review of your bank’s customer identification procedures, you are likely to find regulatory deficiencies if the bank does NOT ____________.
A. require a CIP log at each branch in the prescribed format
B. require its employees to copy the customer’s driver’s license
C. permit a passport as an acceptable form of identification
D. require verification of the identity of each customer
d
A customer defaults on his automobile loan and the bank threatens to repossess the automobile. His uncle’s corporation, his father’s partnership, and his father-in-law agree to cosign the loan. The cosigner notice must be received by the ____________.
A. uncle’s corporation only
B. father-in-law only
C. father-in-law and the father’s partnership
D. uncle’s corporation, the father-in-law, and the father’s partnership
b
A recent regulatory change increased the amount of FDIC insurance coverage for individual depositors. The compliance manager should FIRST _____________.
A. develop a new policy in this area
B. maintain the current program without change
C. update the content of employee training material
D. revise the internal monitoring schedule in this area
c
In monitoring a bank’s compliance with the federal Fair Housing Act, it is LEAST relevant to review ____________.
A. the bank’s financing of rental property
B. handicap accessibility to property secured by a first mortgage loan made by the bank
C. the bank’s participation in advertising for the sale of housing in a community within the bank’s market area
D. the HMDA/LAR for the bank, if applicable, or, alternatively, the loan register for first mortgage loans generated by the mortgage department
b
When conducting a compliance review of consumer closed-end mortgage periodic statements, be sure to check for:
A. Balance on which the finance charge is computed
B. Past Payments Breakdown
C. Minimum Payment Warning Statement
D. Grace period, or that no grace period applies
b
When conducting an audit of IRS tax compliance procedures, you should select a sample of which of the following forms? A. 1099A B. CTR Form 104 C. 17 F-IX-A D. FFIEC-004
a
Your bank is considering a candidate for a vacant director position. The GREATEST potential regulatory risk, if the individual is appointed, is his or her ____________.
A. past overdraft history
B. current indebtedness to your institution
C. current indebtedness to correspondent banks
D. level of stock ownership in your institution
b
You learn that your bank has created a report of all deposit and loan customers. Presumed gender and ethnicity for each customer has been assigned based on customer first and/or last names. You should tell management that they ____________.
A. Must destroy the report because of fair lending concerns
B. May provide the report to a third party vendor who is using it to determine who will receive a flyer about home equity loans
C. Must provide the report to an affiliate for marketing purposes
D. May use the report to conduct an internal fair lending review
d
To determine whether your bank is a small servicer under Regulation Zs definition of small servicer and thereby exempt from RESPA requirements for early intervention mortgage servicing notices, you should:
A. Determine your bank’s asset size as of December 31st of the prior calendar year
B. Determine the number of mortgage loans your bank originates as of the current date
C. Determine the number of mortgage loans your banks services together with any affiliates as of the current date
D. Determine whether your bank is located in a rural or underserved county
c
When establishing an exemption from currency transaction reporting for Phase II exempted customers, banks must perform all of the following EXCEPT ____________.
A. obtaining a signed customer exemption statement
B. filing Form 110 (Designation of Exempt Person)
C. establishing and maintaining a monitoring system to detect suspicious currency activities
D. manually reviewing the exempt person supporting documentation
a
When your bank receives a garnishment order for an account that potentially contains federal benefit payments, how long of a lookback period is the bank required to check the account for covered benefit payments? A. 2 months B. 1 month C. 6 months D. 3 months
a
Under the Interagency Statement on Retail Sales of Nondeposit Investment Products, the required disclosures can be provided to the bank’s customer in all of the following ways EXCEPT:
A. orally during sales presentations
B. orally and in writing at the time an investment account is opened
C. in advertisements and promotional brochures
D. in writing by a teller when referring a customer to the investment sales area
d
The compliance manager’s bank has a corporate initiative to acquire three financial institutions during the next two years. The recently completed regulatory examination included National Flood Disaster Protection Act violations, reimbursable violations of the Truth-in-Lending Act, a ‘‘needs to improve’’ rating under CRA, and violations for improperly completing hold notices under Regulation CC. On which of the following violations should the compliance manager focus FIRST?
A. National Flood Disaster Protection Act
B. Truth-in-Lending Act
C. CRA
D. Regulation CC
c
In which of the following situations is a bank required by federal regulation to verify and record the identity of the customer and provide that, and other specific information, only upon request from the IRS?
A. A customer asks to withdraw $5,000 from his checking account and asks that the withdrawal be issued in the form of a cashier’s check.
B. An individual purchases $12,000 worth of traveler’s checks using cash to pay for the purchase.
C. A customer uses cash to purchase traveler’s checks totaling $2,000 and, at the same time, uses cash to purchase a cashier’s check for $3,000.
D. A customer deposits $6,000 in cash to her savings account.
c
A number of bank customers are members of the Army Reserve and have been called to active duty for six months. Your bank’s president wishes to issue a press release stating that the bank will suspend all loan payment requirements while loan holders are on duty, extend the maturity date of each loan, and permit interest to accrue at only 10% while the loan holders are on active duty. You are asked to review the press release. Which of the following statements represents the advice you should give the president?
A. The bank is in full compliance with the Servicemembers’ Civil Relief Act.
B. The bank must reduce the interest rate to 6% on the date that the service persons enter the area declared as an official ‘‘Disaster Area.’’
C. The bank must reduce the interest rate on loans to military persons to 6% effective 30 days after notice is received by the bank.
D. Upon request, the bank must reduce the interest rate on the loans to 6% effective on the date that the service members are called to report for active duty, and remain at 6% until they are released from orders.
d
