When a creditor makes a significant change in terms of a credit card account, the creditor must:
a. Provide affected consumers with a notice that includes a statement that the consumer may reject the change and continue to use the account for a period of 6 months under the existing terms
b. Provide affected consumers with a notice that includes a statement that the consumer may reject the change but the consumer's ability to use the account for further advances will be terminated or suspended
c. Provide affected consumers with a notice that includes a demand for payment in full of the account balance with at least a 60 day grace period
d. Provide consumers with a statement of reasons for the change
In which of the following transactions is a disclosure statement to the consumer required?
A. A $125,000 loan to purchase and secured by an unimproved lot on which the borrower eventually plans to build a home for retirement
B. A $100,000 loan made to a physician for a recreational vehicle, secured by the physician's business equipment
C. A $75,000 loan to purchase a speedboat
D. A $200,000 unsecured loan to purchase a residence
Which of the following is a loan originator?
A. The office manager of a manufactured home retail center who does not accept applications from customers?
B. A bank teller who distributes preprinted home loan rate sheets to customers who inquire
C. A customer service representative who assists applicants that complete an application and collect application data, but does not have loan authority
D. A real estate broker who refers prospective purchasers to a mortgage company
For purposes of calculating an APR, an "irregular transaction" includes:
a. Multiple advance construction loans
b. A single payment loan
c. A loan with a final balloon payment
d. A loan with quarterly payments
First National Bank received a credit application from Lewis Nelson for a home equity loan. 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.
In which of the following cases would ABC Bank have to obtain an appraisal performed by a state-certified appraiser?
A. On a $200,000 loan made by Mr. and Mrs. Littlefield to purchase their home, which will be secured by their home
B. On a $75,000 loan to be secured by a two-story commercial office building
C. On a $150,000 working capital loan fully secured by a bank certificate of deposit, on which the loan officer has also taken a lien on a vacant lot owned by the borrower
D. On a $300,000 loan to Mr. Burch secured by his life estate in his home. The home was left to Mr. Burch on the death of his father. The father's will states that the home will belong to Mr. Burch during his life but will revert to Mr. Burch's son on his death.
On Monday, ABC Bank received a written application from the Browns for a loan to purchase their home. Later that day ABC mailed the Browns their early TILA disclosures. On what day may ABC debit the Browns account for an application fee?
Which of the following practices is not allowed under the Credit Card Practices Rules?
A. Charging a late fee when a payment is late
B. Requiring a security deposit for a credit card account
C. Calculating the balance based on days in a previous billing cycle because the grace period was lost
D. Charging a variable rate APR based on a public index that changes from time to time
Mr. Edwards has a First National Bank debit card. The card allows him to withdraw funds from his checking account to pay for goods or services by using major credit card networks. Providers of services that accept MasterCard or VISA will accept Mr. Edwards debit card. Mr. Edwards travels often. In March, while at home, he reviews his checking account statement and notices three ATM transactions whereby funds were debited from his account using the debit card. The transactions were made in San Diego during February. Mr. Edwards never went to San Diego. None of his family members have debit cards. He called the bank and asked to be reimbursed for the $750 that was taken from his account but not authorized by him. What may the bank do?
A. Point out to him the language in his account agreement where he agrees to be liable for all withdrawals, whether or not authorized, and tell him that they will not credit his account for the funds
B. Tell him that they will investigate and the funds should be credited within 20 business days
C. Provisionally credit the account within 10 business days and take up to 45 days to investigate the unauthorized debit
D. Provisionally credit the account within 20 business days
Which of the following actions is allowed under the Fair Debt Collection Practices Act?
A. Sending a communication that looks like a telegram to a consumer by regular mail
B. Sending a postcard to a consumer asking for payment of the past due balance
C. Accepting certain postdated checks
D. Requiring consumers to pay collection fees not authorized by the contract when they pay the balance of their accounts
The manager of teller operations contacts the compliance manager about a high level of exceptions noted on hold notices during recent compliance monitoring. Which of the following recommendations is MOST appropriate for the compliance manager to make?
A. Require an officer's review and signature on all hold notices.
B. Support the purchase of a new teller computer system to automate hold notices.
C. Increase the frequency and volume of compliance monitoring to better determine the weak areas.
D. Arrange remedial training on hold notice requirements for tellers where the exceptions were noted.
Your institution is open for all business functions on Saturday. Customer Jones deposits a $4,000 IRS refund check payable to him with a teller on Saturday at the driveup window. When must the funds be made available for withdrawal?
d. Same day
Which of the following features is acceptable in a high-cost mortgage loan?
A. A late fee constituting five percent of the amount past due
B. A payment schedule that allows for negative amortizations
C. A prepayment payment penalty provision effective for the first year of the loan
D. An unconditional demand clause
Which of the following transactions is subject to the provisions of Regulation O?
A. Time deposit account held by a director
B. Travel advance to an executive officer outstanding for less than 30 days
C. Extension of credit to a director of an unaffiliated, competing, noncorrespondent bank
D. Extension of credit to a member of the bank's board of directors
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.
On which of the following adjustable-rate loans must the bank use an index beyond its control?
A. A loan to purchase a home to refurbish and resell for a profit
B. A loan to purchase a vacation home
C. A loan to purchase a duplex where the borrower will live in one of the units
D. A loan to purchase a home to be used as rental property
The OCC recommends all but one of the following actions to help prevent a national banks purchasing or acquiring predatory or abusive loans. Which practice is NOT recommended?
A. Establish policies on the bank's relationship with third-party brokers and originators
B. Review loan documentation
C. Audit the third-party broker
D. Require the broker to establish a reserve account for legal contingencies
Acme Mortgage Company owns and services a mortgage loan for John Smith. The company received a statement from Mr. Smiths insurance company indicating that the premium on the hazard insurance has not been paid and that it will be cancelled soon if not paid. Mr. Smiths escrow account has insufficient funds to make the insurance payment. Under what circumstances may Acme Mortgage Company force place hazard insurance on Mr. Smiths property and charge him for the premium?
A. Once they notify Mr. Smith and give him an opportunity to make the payment, Acme can force place a policy
B. Acme may not force place a policy in this case, it must advance funds to the escrow account to make the payment so the insurance will continue
C. Acme does not have to give advance notice; once the policy is finally cancelled, they can force place a policy
D. Acme can force place a policy as long as it is not more expensive than the original premium
An individual borrowed $1,000 to remodel her mobile home. She lives in the mobile home that is not anchored to the ground. The loan will be secured by the mobile home, but the borrower does not own the lot on which it is parked. For HMDA purposes, this loan is considered to be which of the following types of loans?
A. Consumer RV
B. Home equity
C. Home improvement
D. Second mortgage
Roberta Miltons car lease with First National Bank reached its termination on August 1. Roberta and the bank agreed to extend the lease on a month-to-month basis without charging her a fee for doing so. What disclosure responsibilities does the bank have now?
A. None are needed now.
B. None, until after six months of the month-to-month lease
C. The bank must make an entirely new initial disclosure
D. The bank must disclose the estimated residual value at the end of six months
Which of the following is a contract provision permitted under Regulation AA?
A. Confession of judgment clause
B. Waiver of exemption clause
C. Assignment of wages
D. Purchase-money security interest in household goods
Legislation was recently enacted to reform consumer real estate protection laws, and the bank will now have to change the way it documents, discloses, and advertises real estate loans, an integral product line at your bank. What should the compliance professional do FIRST to implement the new law within the bank?
A. Read the law and write a new real estate compliance policy
B. Form a task force of the business unit managers whose departments will be affected by the law to collectively form an action plan
C. Talk to the bank president about the need for more resources in compliance
D. Sign up all bank personnel affected by the changes for a seminar on the new law
How must a card issuer disclose a minimum payment on a periodic statement for an open-end credit account that is not home-secured?
A. By disclosing the actual repayment for the consumer's account balance, rate, and terms over the remaining term of the account
B. By providing a toll-free telephone number that will respond with a generic payment example
C. By disclosing the estimated monthly payment for repaying in 36 months
D. By disclosing several generic examples that could apply to the consumer's account
Friendly Savings Association has made loans to ABC Co., Inc., and several of its subsidiaries. The association does not believe that the loans have to be combined under the common enterprise test. To what lending limit, if any, does the association have to adhere in its lending to ABC Co., Inc., and its subsidiaries?
A. None. If the loans can be combined, there is no limit on the group as a whole, only separately
B. 15 percent of the association's capital and unimpaired surplus
C. 10 percent of the association's capital and unimpaired surplus
D. 50 percent of the association's unimpaired capital and unimpaired surplus
The Mortgage Department asks the Compliance Officer to evaluate its current practices surrounding collecting application fees from mortgage loan applicants in light of the new TRID rules that became effective October 3, 2015. Which of the following options presented by the Mortgage Department to the Compliance Officer complies with Regulation Z?
a. Collection application fees from applicants (cash or check) at time application is submitted and hold for deposit until after bank receives intent to proceed from applicant
b. Send a Request for Application Fee Form to applicant with Loan Estimate and other disclosures with instruction to submit after customer provides an intent to proceed with the application
c. Have applicant sign a form that provides the method of payment (credit card number or bank account number) for the application fee at the time the application is completed and with to process the payment until after the intent to proceed is received
d. Have applicant sign an authorization form at time of application that authorizes the bank to deduct the application fee from the customer's checking account or savings account
Cassandra Phillips requested a loan to purchase a boat. She asked for $15,000 at 7.5 percent for seven 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 percent for five 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.
Which of the following is an exception from the lending limit regulations for national banks and savings associations?
A. A standby letter of credit
B. A commercial letter of credit
C. A loan made to a foreign government
D. A loan made to a dairy farmer
First National Bank has an overdraft privilege program available to its deposit customers. Under this program the bank generally pays checks, ACH items and recurring debit card transactions presented against accounts up to a pre-set limit. The bank does not pay overdrafts originated as ATM transactions or as one-time debit card transactions. From time to time, however, point of sale transactions initiated by debit cards are presented as preapproved items and, according to the rules of the card association, the bank must pay the transaction as presented. Therefore the bank does have a few overdrafts originated as one-time debit card transactions. Which of the following is a true statement for the bank?
A. The bank must provide an opt in notice to all its customers
B. The bank does not have to provide an opt in notice, but it cannot charge an overdraft fee on the inadvertent overdrafts created by ATM and debit card transactions
C. The bank does not have to provide an opt in notice to its customers and it may still charge for inadvertent overdrafts created by ATM and one-time debit card transactions
D. If the bank pays overdrafts originated by check, it must also pay those originated by ATM and one-time debit transactions
When helping a loan officer determine whether the bank must give a written adverse action notice to a business loan applicant, what should 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 proprietorship)
Borrower A has a variable rate loan secured by his principal dwelling for a term of 10 years. Which of the following is NOT a Truth in Lending requirement for his loan?
A. Providing a variable rate disclosure of certain terms of the loan program at the earlier of the application time or before a nonrefundable fee is paid
B. Limiting the number of interest rate increases in each calendar year
C. Including an interest rate cap in the loan contract
D. Providing a consumer handbook on adjustable-rate mortgages to the borrower
One of the differences between the Fair Housing Act and the Equal Credit Opportunity Act is:
a. The FHA prohibits illegal discrimination in housing-related credit and ECOA doesn't
b. The ECOA affects advertising practices and FHA doesn't
c. The FHA prohibits discrimination on the basis of familial status and ECOA doesn't
d. The ECOA applies to potential credit applicants and the FHA only applies to borrowers
A bank has been criticized by its regulators for weaknesses in its compliance training program. Bank management has asked the compliance officer to fix the problem. What should the compliance officer do FIRST?
a. Hire additional staff to conduct compliance training for all affected areas of the bank
b. Identify what the weaknesses in the training program are
c. Purchase software to track training attendance
d. Schedule training as soon as possible on a hot topic such as fair lending or Bank Secrecy Act
Which of the following is NOT a required disclosure for an income tax refund anticipation loan to a servicemember?
A. The military annual percentage rate (MAPR)
B. The annual percentage rate (APR)
C. A description of each of the events of default
D. A list of all the fees included in the MAPR
Regulation E disclosures must FIRST be provided to an EFT customer either at the time the account is opened or at what other time?
A. With the first periodic statement
B. Before the first EFT occurs
C. Within three business days of opening the account
D. Within three business days of receiving the customer's request for EFT services
First Nationals funds availability policy states that funds from checks are generally available for withdrawal on the next business day following the day of deposit. The policy also states that longer holds may be required on a case-by-case basis and advises customers to ask if they need to be sure of the availability of a specific deposit. Henry Cranston deposited a check into his account on Monday. Henry needed to use the funds on Tuesday but he did not ask about the availability at the time of the deposit. A bank teller accepted the deposit and gave Henry a receipt. After Henry left the bank, the tellers supervisor noticed the check and decided that a longer hold needed to be placed and the funds would not be available until Wednesday . Which of the following actions must the bank perform?
A. The bank must make the funds available on Tuesday, because Henry was not notified at the time of the deposit.
B. The bank may hold the funds for a longer time period but must send Henry a hold notice.
C. The bank may hold the funds for a longer time period and need not notify Henry because he did not ask about the availability of the deposit.
D. The bank may hold the funds for a longer time period and may, at its option, send Henry a notice of the delay.
ACME Bank would like to offer a 2.9 percent APR promotional rate for its new credit card. The rate is effective for the first six months of the account, unless the borrower makes a late payment or otherwise defaults on the credit card account. At the end of six months, or if an earlier event triggers a rate increase, the rate will increase to 15 percent APR. In order to be in compliance with the Credit Card Practices guidance, which of the following account terms does NOT need to be included in promotional materials?
A. All material limitations on the applicability of the promotional rate
B. The time period the rate is in effect
C. Possible reasons for shortening the promotional rate period
D. A typical payment that would be due at the promotional rate
When a bank makes a rescindable closed-end home improvement loan to a consumer, to which of the following may the bank advance funds before the end of the rescission period?
A. To the borrower
B. To the contractor for delivery of materials
C. To an escrow account with a third-party escrow agent
D. To an escrow account with the borrower acting as the escrow agent
Which of the following actions is prohibited under EFTA/Regulation E?
a. Imposing a fee for EFTs
b. Requiring a consumer to authorize payments to a credit account as a condition of an extension of credit
c. Requiring a consumer to provide a written confirmation of an oral stop payment order
d. Requiring a consumer to request an access device in writing
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
First National Bank has made three loans to Mrs. Elmwood. Two of the loans are regulated credits (they are for the purpose of purchasing margin stock and secured by margin stock). The third loan is for the purpose of purchasing margin and nonmargin stock, and the loan is secured by real estate and margin stock. Can the bank avoid having the third loan combined with the other two for Regulation U purposes?
A. Yes, but the real estate must have a value of at least twice as much as the third loan.
B. No. At least the part of the loan attributable to the security of margin stock must be treated as a regulated credit and combined with the other two loans.
C. No. All of the third loan must be combined with the others.
D. Yes. As long as there is any other collateral, the loan will not be a regulated credit.
What is the longest time after board approval that a bank can approve a line of credit for an executive officer?
A. 12 months of such approval
B. 9 months of such approval
C. 14 months of such approval
D. 6 months of such approval
"Your Home Loan Toolkit" is one of the disclosures that needs to be provided to consumer home loan applicants...
a. Not later than 3 business days after a covered application is received
b. With an application form to be completed by an applicant for a covered application
c. At least 3 business days prior to loan consummation for a covered loan
d. At least 3 business days after a covered loan application is received
Robin Myers defaulted on her car loan at the bank. The bank sent several reminder letters and, finally, a demand for payment. The last letter said that if she did not pay, the bank would repossess the car. Before its repossession Robin joined the Marines. She sent the bank a notice that she was now in active military duty and asked the bank to forebear taking any further action against the collateral. What can the bank do?
A. Proceed with self-help repossession of the vehicle since she had already been notified of the default before joining the service
B. File a petition with a court of competent jurisdiction and ask for permission to repossess the car
C. Ask Robin's commanding officer for permission to repossess the car
D. Repossess the car but don't sell it until Robin's military service is over
If provisional credit is made to a customer for an alleged error on an ATM cash withdrawal, Regulation E requires a bank to determine whether an error has occurred and to notify the customer NO LATER THAN how many days after the bank receives notice of the alleged error?
A. 10 business days
B. 10 calendar days
C. 45 business days
D. 45 calendar days
If a bank originates certain high cost closed-end mortgage loans, it must be sure to avoid which of the following loan terms for such loans?
a. Due on sale clauses
b. Late charges
c. Adjustable rate
d. Negative amortization
Under Regulation E, when a bank imposes a change that increases fees or charges related to electronic fund transfers, or restricts availability of electronic transfers, it must provide notice to its customers. How many days in advance of the change must the bank notify customers?
First National Bank is preparing for a regulatory examination that will include a HELOC portfolio acquired through a merger last year. The Risk Management team is reviewing internal controls, policies, and procedures to ensure the process for handling HELOC transactions meets expectations outlined in the Interagency Guidance on Home Equity Lines of Credit Nearing Their End of Draw Period. Which of the following should not be evidenced in the banks current HELOC risk management practices?
A. Detailed monthly reporting on end-of-draw exposures is provided for inclusion in ALLL estimates.
B. When working with a high-risk borrower, the bank evaluates their ability to repay the loan.
C. Borrowers are directed to contact the Bank's customer service team two weeks before their end-of-draw date to discuss alternative repayment options.
D. The consumer lending quality assurance team performs quarterly reviews on a sample of HELOC transactions nearing their end-of draw period.
In which of the following cases is a notice required to be sent to the accountholder upon receiving a garnishment order related to his account?
A. The account had a $500 Federal benefit payment deposited 3 weeks earlier and the account balance is now $700
B. The account has never had a Federal benefits deposited into it and the current balance is $400
C. The account had a $500 Federal benefit payment deposited 3 weeks earlier and the account balance is now -$27
D. The account last had a Federal benefit deposited into it six months prior to the order and the current balance is $250
To which homeowners must a bank give homeownership counseling disclosure and a Servicemembers Civil Relief Act Notice?
A. All borrowers at time of application
B. Only borrowers who are servicemembers
C. All borrowers who are more than 45 days delinquent on their mortgage loan secured by a principal dwelling
D. All borrowers who are no more than 45 days delinquent on their mortgage loan secured by a principal dwelling
Which of the following is true regarding extensions of credit to executive officers, directors, and principal shareholders?
A. Must be approved in advance by the board of directors if the aggregate credit is more than the greater of either $25,000 or 5 percent of the bank's capital and surplus, not exceeding $500,000
B. Must be approved in advance by the board of directors if the credit is greater than $50,000 or 5 percent of the bank's capital and surplus
C. May not exceed $100,000 in the aggregate, regardless of approvals
D. May not exceed $250,000 in the aggregate, regardless of approvals
When must a cosigner notice be given to the consumer for an open-end credit account?
A. Before the consumer becomes obligated on the account
B. At the time of the application
C. With the first periodic statement
D. Within 30 days of the date of the first transaction on the account
For which of the following deposits is a bank NOT required to give next day availability?
A. A deposit of seven $100 bills
B. A deposit of a Social Security check by mail
C. A deposit of a Social Security payment
D. The deposit of a cashier's check at an ATM
What must a married couple do to waive their right of rescission on their residential property?
A. Call the bank's toll-free telephone number
B. Obtain the loan officer's written approval
C. Sign the bank's standard waiver form
D. Sign a written statement indicating the reason for the waiver
Which of the following closed-end loans is subject to the right of rescission?
A. A loan to purchase a vacation home, secured by the vacation home itself
B. A loan to purchase a principal residence, secured by the residence
C. A loan to purchase furniture for use in a principal dwelling, secured by the furniture
D. A home improvement loan for the borrower's principal dwelling, secured by the dwelling
Which of the following practices could a national bank implement and remain in compliance with the Credit Card Practices guidance?
A. Promote a credit card with a limit ''up to $5,000'' but send the promotional materials to consumers with lower credit scores who would qualify only for a $1,000 limit
B. Promote credit cards with ''up to'' limits and charge a nonrefundable annual fee of $100 per account, due with the application and before the consumer is told the actual account limit
C. Raise interest rates on borrowers who default on loans to other creditors, without disclosing this practice
D. Offer a promotional rate for only 90 days after the card is activated
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ﾒ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ﾒ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.
Which of the following is a NOT a responsibility of a regulated financial institution under the SAFE Act?
A. Hire mortgage loan originators as employees
B. Ensure that mortgage loan originators that are employees register with the Registry
C. Adopt policies and procedures for compliance with the SAFE Act
D. Submit required information on the bank to the Registry
In a review of a bankﾒs home mortgage loan application register, which of the following must be included?
A. Loans made or purchased in a fiduciary capacity
B. Servicing rights purchased
C. Interim construction loan applications
D. Loans made and sold within the reporting period
The compliance officer gets a call from the head of the Mortgage Department who informs the compliance officer that they are planning to make a second lien mortgage loan on a residence. The property is located in a Special Flood Hazard Area requiring flood insurance, but the customer is objecting to getting flood insurance. The customer says that the first lienholder never required it, so why is our bank requiring it. The compliance officer should tell the Mortgage Department head...
a. If the first lienholder didn't require the flood insurance, we, the second lienholder, don't have to either
b. We do need to require the borrower to obtain flood insurance that fully covers the property including the first lien loan balance
c. We do need to require the borrower to obtain flood insurance that covers our second lien loan amount
d. We cannot make the loan, because the first lienholder did not properly require flood insurance
With regard to standards for wear and use of leased property, which of the following statements is true?
A. A lessor must adhere to the manufacturer's standards for wear and use of the leased property.
B. A lessor must develop and disclose its own standards for wear and use of leased property.
C. A lessor must provide a notice of wear and use standards on motor vehicle leases.
D. A lessor need not provide a notice of wear and use standards on motor vehicle leases if the lessor imposes an automatic, standardized charge.
A Notice to Home Loan Applicant under the FCRA must include:
a. A statement that if the consumer has questions about the terms of the loan, the consumer should contact the consumer reporting agency
b. A statement that the lender plays no part in the credit decision
c. A statement describing what a credit score is
d. A statement that credit scores are not as important as income in determining whether a consumer will receive credit
First National Bank has an employee benefit program whereby all bank employees who meet the banks credit underwriting standards may obtain consumer loans for major purchases or expenses at a rate that is less than the banks prime rate. Can the bank allow its executive officers to borrow under this program?
A. No. Executive officers may not have preferential interest rates under any circumstances.
B. No. However, the related interests of the executive officers may take advantage of it.
C. Yes. However, executive officers must secure their loans with collateral valued at 100 percent of the loan balance or more.
D. Yes. Provided the program is available to everyone at the bank as an employee benefit, executive officers may also participate
Of the following, which is the most likely to be a violation of Regulation C?
A. The MSA number, instead of the MSA name, is used for each loan and application
B. The ''reasons for denial'' column is blank
C. Race, national origin, and gender information are not included for purchased loans
D. The gender of the applicant is designated by the letters M or F
Your bank has decided to discontinue offering debit cards to business customers. Debit cards are currently in the hands of only about 100 business customers who have business checking accounts at the bank. You are asked about what kind of notice, if any, is needed to these customers to discontinue the debit cards that these customers already have. Your first step should be to:
a. Review Regulation B adverse action notice requirements
b. Review Regulation Z change in terms notification requirements
c. Review the cardholder agreement for notification requirements
d. Review Regulation E change in terms notification requirements
First National Bank has obtained a judgment against Morris Smith for a defaulted consumer debt. The judgment is for $9,500 of principal plus interest accrued through the date of default and $500 in interest and late charges incurred since the date of default. Morris brings $5,000 to the bank as a partial repayment of the debt. How must the bank apply the money under federal law?
A. The entire $5,000 must be applied to the principal amount owing.
B. The $5,000 must be applied first to interest accrued up to the date of the default, then to principal.
C. The bank can apply the money to any amounts owed at its discretion.
D. The bank must apply the money first to interest and late charges accrued after the date of the default.
A bank does not know all of the specific information to be disclosed on the lease at the time of the consummation. What may the bank do after attempting to obtain the information?
A. Omit the unknown disclosures
B. Estimate the amounts and note that the information is estimated
C. Delay consummation of the transaction until the information is ascertained
D. Estimate the information based on averages of all other leasing transactions the bank has made
Which one of the following loan purposes is NOT an acceptable "Loan Purpose" disclosure for the Loan Estimate or Closing Disclosure form on page 1?
c. Home Improvement
d. Home Equity Loan
How is the maximum loan value of margin stock defined?
A. As a percentage of the amount to be loaned
B. As a percentage of the book value of the stock
C. As a percentage of the current market value of the stock
D. As a percentage of the good-faith loan value of the stock
Martha Winters obtained a loan from First National Bank to purchase her living room furniture. The bank took a security interest in the furniture as collateral on the loan. Before the end of the loan term, Martha refinanced the remaining balance of the furniture loan at Second National Bank. Can Second National Bank take a security interest in the furniture?
A. Yes, but only if it obtains an assignment of First National's security interest
B. Yes, because the loan is a refinancing of a purchase-money transaction
C. No, a nonpossessory security interest in consumer goods is prohibited
D. Yes, furniture is not considered to be household goods under the regulation
Second State Bank offers a mortgage product that involves simultaneous second lien loans. These include a first lien for up to 90 percent of the purchase price and a second loan for the down payment, secured by a second lien on the property. The bank would like to be in full compliance with the Interagency Guidance on Nontraditional Mortgage Product Risks. Which of the following should Second State Bank incorporate into its loan program?
A. Risk management procedures to measure the risk of all simultaneous second lien loans and report results to management
B. A 100 percent loan loss reserve on all simultaneous second lien loans
C. A product combining simultaneous second lien loans with negative amortization features made to nonowner occupied borrowers
D. A prepayment penalty on all simultaneous second lien loans
First National Bank is located outside an MSA. It received 120 home loan applications last year. Which statement best describes the banks Fair Housing recordkeeping requirements?
A. It may either keep the Home Loan Data System records, or it may keep the HMDA LAR information.
B. It must complete up to 2,000 Home Loan Data Submission Forms per bank or 250 per decision center and submit them to the OCC within 30 days.
C. It must keep a HMDA LAR.
D. It must keep the Home Loan Data System records.
Which of the following elements would NOT be a potential indicator of redlining?
A. The absence of census tracts with a racial minority character within an institution's assessment area
B. The presence of census tracts with a racial minority character immediately adjacent to but outside of an institution's assessment area
C. A special marketing program aimed at racial minority groups within an assessment area
D. Non-minority geographies that appear to have been given favorable treatment
Which of the following national banks must keep an Inquiry/Application Log?
A. A bank that had 50 or more home loan applications in the previous year
B. A bank that has $50 million or more in assets
C. A bank that is located in an MSA
D. A bank that has been requested by the OCC to keep such a log because of complaints that its lending practices may be discriminatory
You, as compliance manager for the bank, are asked to participate in a meeting to plan a training program for commercial loan officers for the upcoming year. Which of the following regulatory topics would you recommend to be included in the training program?
a. What constitutes a changed circumstance
b. Adverse action notification procedures
c. Ability to repay guidelines
d. Early disclosure timing requirements
First National Bank has denied a credit application from Mr. Johnson because the application scored too low on the bankﾒs internal credit-scoring system. Mr. Johnsons credit report, received from a credit reporting agency, scored a 4 out of a possible 10. Other parts of Mr. Johnsons application received low scores also. Which statement best describes First Nationals 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
Under the Fair Debt Collection Practices Act, a debt collector may not:
a. Accept checks that are post dated by more than 1 day
b. Accept post dated checks
c. Solicit a post dated check for payment of a debt for purposes of avoiding additional communications with the debtor
d. Solicit a post dated check for payment of a debt for purposes of threatening criminal prosecution
Assume that the properties involved in the following loans are located in special flood hazard areas. Which loans would NOT require flood insurance as a condition of the loan?
A. A mortgage loan made to a consumer secured by a residence in a community in which flood insurance is available
B. A commercial loan secured by residential real estate located in a community in which flood insurance is available
C. A consumer loan secured by a lake house located in a community in which flood insurance is not available
D. A loan for the purpose of making investments secured by commercial rental property located in a community in which flood insurance is available
For how long may consumers exercise the right to rescind transactions in closed-end loans?
A. Three years after the consummation of the transaction
B. Three calendar days after the consummation of the transaction or the receipt of notice of the right to rescind, whichever is later
C. Three business days after the later of the consummation, delivery of notice of the right to rescind, or delivery of required disclosures
D. Three business days after the receipt of the early disclosures
The federal banking agencies have proposed an amendment to Regulation Z that would require a new early disclosure statement for loans secured by the borrowers principal dwelling. After reading the proposed change, what should the compliance professional do FIRST?
A. Establish a task force to study the proposed rule.
B. Contact the bank's platform software vendor to determine whether it will be ready for the change
C. Prepare a summary document that outlines the effects the proposed rule would have on the bank's operations
D. Train bank staff on the new rule
Several types of loan-related data appear in the following list. Which type of data is NOT required to be reported under HMDA?
A. Data on multifamily housing
B. Data on unsecured home improvement loans
C. Data on refinancings of home purchase loans
D. Data on loans to purchase residential lots
First National has an account for Mary Jones, who has had several overdrafts in her account over the past few months. On February 15, she overdrew her account and had a negative balance, which lasted for 10 days. As of March 14, the number of negative days in the statement cycle was three; and as of April 14, the number of days was six. The last overdraft occurred on May 14, and the account was overdrawn for three days. Mary has not been overdrawn since May. First National has extended the holds placed on all deposits to her account. How long can the bank continue to subject her account to extended hold periods?
A. Until May 14
B. Until October 14
C. Until July 14
D. Until April 14 of the next year
When does a notice that the borrowers property is located in a special flood hazard area have to be given to the borrower?
A. Before making a commitment to lend
B. Within 10 days after closing
C. At the time of the application
D. Within a reasonable time before completion of the transaction, but no later than the bank sends other notices concerning insurance or taxes
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
Which of the following describes the record retention requirements under Regulation B for a credit application from a business with annual gross revenues in excess of $1,000,000?
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.
To what amount must a bank limit interest on debts under SCRA unless otherwise determined by a court?
A. A rate, specified by military counsel, based on the servicemember's financial condition at the time of call to active duty
B. The Wall Street Journal's Prime Rate in effect at the time of the servicemember's call to active duty
C. Six percent for all accounts made prior to the servicemember's call to active duty
D. The amount needed to fully amortize the debt while the servicemember is on active duty
Acme Mortgage has filed a foreclosure action on the property securing John Does mortgage. The foreclosure sale will be held in 120 days. If Acme receives an application for a loss mitigation option from Mr. Doe 100 days from the foreclosure date, which of the following actions must Acme take?
A. Withdraw the foreclosure action within 30 days of the receipt of the application
B. Notify the borrower of the decision on the completed application within 14 days of the receipt of the application
C. Notify the borrower of any missing information within 10 days of the receipt of the application
D. Acknowledge the application in writing within 5 days of receipt of the application
To which of the following do national bank and savings association lending limit rules apply?
A. Loans secured by savings bonds
B. Loans secured by Treasury bills
C. Loans secured by third-party guarantees
D. Loans secured by customer deposits
Alicia Perez telephoned the customer service department at First National Bank and requested to have $300 debited from her account and sent to her sister in Peru three days later. Which of the following alternatives best states the banks responsibilities to Ms. Perez?
A. Provide a written prepayment disclosure and receipt to Ms. Perez as soon as possible, but before the transfer is made.
B. Provide a written prepayment disclosure within one business day of the request; a receipt is not required
C. Provide an oral prepayment disclosure at the time of the request
D. Provide an oral prepayment disclosure at the time of the request and the receipt information on the next account statement
When may a bank force the placement of flood insurance on the borrowers property?
A. Immediately on the expiration of the flood insurance
B. Ten days after notifying the borrower
C. Twenty-one days after notifying the borrower
D. Forty-five days after notifying the borrower
For purposes of insider lending laws and regulations, what is the definition of the term executive officer?
A. All bank officers at or above the level of executive vice president
B. Anyone who has the authority to participate in major policymaking functions at the bank
C. Anyone who has the authority to participate in lending decisions at the bank
D. All bank officers at or above the level of assistant vice president
The receipt of an EFT must include which of the following terms, as applicable?
a. Posting date of the transaction
b. Institution's toll-free telephone number
c. Calendar date of the transaction
d. Institution's address
Which of the following loans does NOT require flood insurance?
Loan A is a commercial loan that has been on the books for two years and has been renewed twice. Flood insurance was legally required on the loan at the time it was made. There was a flood insurance policy in effect at the loanﾒs inception, but it expired and was not renewed.
Loan B is a consumer loan secured by a mobile home that is located in a flood hazard area in which federal flood insurance is not available.
Loan C is a commercial loan that the bank would be willing to make on an unsecured basis, but the borrower has offered some commercial real estate property as collateral.
The property has one vacant building on it, and it is in a flood hazard area in a community where federal flood insurance is available.
A. Loan A
B. Loan B
C. Loan C
D. None of the loans
First National Banks mortgage lending department makes reverse mortgage loans. The bank services all of these loans and, in fact, has never sold or transferred the servicing of any loan it originated. When the bank receives a consumerﾒs reverse mortgage transaction application, what disclosures must the bank make at the time of application?
A. Give the applicant a Good Faith Estimate of settlement costs, a Special Information Booklet, and a HUD-1 Settlement Statement
B. Give the applicant a Good Faith Estimate of settlement costs, a Special Information Booklet, and a Servicing Disclosure Statement
C. Do not give the applicant any RESPA disclosures, because the bank never sells or transfers servicing of its loans
D. Give the applicant a Good Faith Estimate of settlement costs and a Servicing Disclosure Statement
First National Bank uses one contract for both commercial and consumer credit. The contract contains a confession of judgment clause. What must First National do to comply with the Regulation AA prohibition against such clauses in consumer contracts?
A. Allow the clause to remain in the contracts but do not enforce it in consumer transactions
B. State on the contract form that the confession of judgment is not applicable in a consumer transaction
C. Cross out the clause when the form is used in a consumer transaction
D. Add a statement to the contract in which the borrower agrees to characterize every transaction as a commercial transaction
If a loan is to be secured by a consumers principal dwelling, which of the following actions is prohibited with regard to an appraiser?
A. The banker does not understand the comparable values in an appraisal and asks the appraiser to clarify the information.
B. The banker tells the appraiser that the appraisal will need to show that the property is worth at least $100,000, or the bank will not be able to make the loan.
C. The banker notices that there is a factual error in the appraisal and asks the appraiser to correct it.
D. The banker refuses to pay for an appraisal submitted past the date that the appraiser agreed to provide it.
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
During a recent compliance examination, regulatory examiners found that the bank was not conducting flood hazard area determinations before closing on construction loans. The compliance professional has reviewed the files and agreed with the examiners finding. What should be done FIRST?
A. Review the bank's flood policies and procedures to determine where the compliance failure occurred
B. Conduct a risk assessment of the flood determination requirement on construction loans
C. Prepare an analysis for bank management explaining the requirement
D. Review all construction loan files to determine the extent of the problem
What may a creditor do when furnishing credit information?
A. May designate accounts in any manner that is convenient and reasonable
B. Must designate 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
Consumer reports used for credit transactions may contain which of the following items?
A. Records of bankruptcies for 7 years
B. Adverse credit items for 7 years and bankruptcies for 10 years
C. Records of arrests or convictions for 10 years
D. Paid tax liens for 10 years
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.
First National Bank has a general lending limit of $150,000 and an additional limit of $100,000 for loans that are fully secured by readily marketable collateral. The bank has outstanding to Peter Phillip an unsecured loan for $150,000. Which of the following is legal?
A. The payment of an overdraft on Mr. Phillip's account
B. An additional unsecured loan to Mr. Phillip where the entire loan is sold as a participation to a correspondent bank without recourse to First National
C. The issuance of a standby letter of credit for the account of Mr. Phillip
D. The extension of credit to a general partnership in which Mr. Phillip is a partner
Which of the following is required to be reported on ABC Banks HMDA LAR?
A. An application from Mr. Welch for a preapproval of a home purchase loan application that is approved by ABC in writing but not accepted by Mr. Welch
B. An application from Ms. Ensley for a preapproval of a temporary construction loan that is denied by ABC
C. An application from Mr. and Mrs. Rawlings for a preapproval of a home purchase loan application that is denied by ABC
D. An application from Ms. Connor for a home equity loan to be used to consolidate credit cards
Which of the following loans is NOT subject to Fair Housing monitoring requirements for housing-related loans made by a national bank located outside a metropolitan statistical area (MSA)?
A. A loan to purchase a mobile home
B. A loan to provide permanent financing for the construction of a residence
C. A loan to purchase a residence
D. The refinancing of a home purchase loan
The following statements make assertions about the collection and reporting of data on race, ethnicity, sex, and income. Which statement is false?
A. It must be requested on all HMDA-reportable applications received in person from natural persons.
B. It must be requested only for the loans where the application is taken in person.
C. It must be reported unless the loan was purchased.
D. It must be requested verbally on telephone applications.
Which of the following is the correct response to consumer written requests that they not be contacted again by debt collectors?
A. Collectors may send final demand letters.
B. Collectors may send letters explaining that defaulted obligations are being turned over to attorneys for legal action.
C. Collectors may call and ask for verification of requests to cease communications.
D. Collectors may send letters that remind debtors of their legal obligations under the credit contracts.
As part of an effective compliance management program a compliance officer can monitor customer complaints received by the bank for the purpose of:
a. Verifying the bank's compliance with Regulation AA
b. Identifying possible product and service enhancements
c. Identifying regulatory compliance problems in bank operations
d. Identifying customers who should be monitored for suspicious activity
First National Bank agreed to make a rescindable closed-end home improvement loan to Mr. and Mrs. Smith. The Notice of the Right to Rescind was given to the Smiths on Tuesday at the closing of the loan along with the material disclosures. The Smiths purchased a title policy and paid for a property appraisal for the bank in connection with the transaction. A lien was filed against the Smiths home on Tuesday afternoon. The bank funded the loan on Friday morning at the request of Mr. Smith by crediting the Smiths joint checking account with the loan proceeds. On Friday afternoon Mrs. Smith has a change of heart concerning the transaction and deposits a rescission notice in the mail to the bank. The bank receives the notice on Tuesday morning. All funds have been withdrawn from the account. What should the bank do?
A. Notify the Smiths that the loan proceeds are immediately due and payable and that once the funds are repaid, the lien on the property will be released
B. Release the lien on the property immediately, then refund to the Smiths the amounts they spent for the title policy and appraisal, and then demand repayment of the loan (without interest)
C. Release the lien on the property immediately, and then send a written request to the Smiths asking for repayment of the loan proceeds (without interest)
D. Send a letter to the Smiths explaining that because the rescission notice was not sent within the proper time period, it is ineffective and the loan is still valid
When comparing closing costs on the Loan Estimate form to the Closing Disclosure, which fees are subject to the zero tolerance?
a. Prepaid interest
b. Fees paid to unaffiliated third parties for services that the consumer is permitted to shop for
c. Origination charges
d. Recording fees
Marie Fosse has a mortgage with lender-required PMI. Her loan is covered by the Homeowners Protection Act of 1998. On March 15, 2004, the principal on her loan was at 78 percent of the value of her home. She was 30 days past due on her loan on March 15. On July 15, 2004, her loan will be at the half-way point of its amortization schedule. On May 15 she catches up with her payments and is current on her loan at that time. Which of the following statements is true?
A. The lender should have terminated the PMI on March 15.
B. The lender should terminate the PMI by May 15.
C. The lender should terminate the PMI by June 1.
D. The lender should terminate the PMI by July 15.
When credit card checks accessing open-end accounts (not home secured) are sent to a borrower and the finance charge terms are different than originally disclosed, when must the disclosures be displayed prominently on the front page of the checks?
A. When provided at the time the account is opened
B. When provided more than 30 days after the account is opened
C. When provided in the same envelope as the credit card
D. When provided more than 10 days after the account is opened
ABC Lender is located in a state with a consumer protection law requiring lenders to limit the APR on vehicle title loans to 24 percent. Which of the following is true for ABC Lender?
A. ABC Lender must abide by state law and limit its vehicle title loans to 24 percent to servicemembers
B. The federal regulation preempts state law and ABC may charge up to 36 percent since it is governed primarily by state law
C. ABC has a choice of law; it may choose either the federal regulations or the state law
D. ABC may charge up to 36 percent for nonservicemember borrowers
Which of the following practices is NOT prohibited by RESPA?
A. A lender requiring the borrower to pay a fee for the preparation of a HUD 1 settlement statement
B. A seller conditioning a property sale (that involves a federally related mortgage) on the buyer's purchase of title insurance from a certain title company
C. A lender requiring a consumer to pay for the preparation of documents by a certain attorney
D. A bank paying a referral fee to an independent real estate agent who has generated new mortgage loan customers
For which of the following deposits is a bank required to give next-day availability (assume that all checks are deposited into the account of the payee)?
A. A deposit of pesos
B. A deposit of a Social Security check by mail
C. A deposit of a U.S. Postal Money Order by mail
D. The deposit of a cashier's check through the night deposit box
For how long must a lender retain evidence of compliance with the Truth in Lending Act?
A. One year following consummation of the transaction for all transactions
B. Twenty-five months from the date of the application, except for mortgages, which have a five year retention requirement
C. Six months from the date the loan is repaid, except for mortgages, which have a five year retention requirement
D. Two years after the disclosures are required to be made, except for mortgages, which have a five year retention requirement
For what do ECOA and Regulation 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
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.
First State Bank, a state nonmember bank, is auditing its recordkeeping procedures for compliance with the FDIC Fair Housing regulations. Which loan should be reviewed?
A. A loan to purchase a mobile home to be used as a vacation home
B. A home equity line of credit
C. A loan to purchase vacant land for the construction of a residence
D. A home purchase loan
Records regarding compliance with Regulation M must be kept for how long?
A. Five years following consummation of the lease
B. Two years after the disclosures are made
C. Twenty-five months from consummation
D. One year from the time the disclosures are made
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.
Which of the following actions is most likely to be prohibited under the Fair Debt Collection Practices Act?
A. Pursuant to a corporate policy, individual collectors using an alias when contacting consumers
B. Calling a consumer's neighbors to leave messages when the consumer has a telephone
C. Telling a consumer that a lawsuit would cause the consumer inconvenience and embarrassment
D. Referring to the fact that a consumer could be subjected to criminal prosecution for issuing bad checks
Under HMDA, what is the threshold for reporting the interest rate spread for first lien mortgage loans?
A. Equal to or greater than 1.5 percentage points
B. Equal to or greater than 5 percentage points
C. Equal to or greater than 7 percentage points and when the loan is subject to the Home Ownership and Equity Protection Act
D. Less than 8 percentage points but greater than 5 percentage points
First National Bank makes many loans that are covered by RESPA. Most are closed at a title company. First Nationals staff prepares the Good Faith Estimate. The title company generally prepares the HUD-1 Settlement Statement. First Nationals compliance officer conducted an audit of the real estate files and found that, in a significant number of cases, the title-related charges on the Good Faith Estimates varied from those on the subsequently provided HUD-1s by more than 20 percent, causing all of the charges within its category of settlement costs to be greater at closing by 12 percent to 17percent. Is this a problem for the bank?
A. Yes, title-related fees should not vary by more than 15 percent.
B. Yes, these disclosures should be exactly the same.
C. Yes, this category of fees should not vary by more than 10 percent.
D. No. It is generally understood that the amounts in the Good Faith Estimate are initial numbers only, and they are expected to change.
When must disclosures on consumer leasing transactions subject to Regulation M be made?
A. At the time of the application
B. Before the consummation of the lease
C. Before the first payment due under the lease
D. Within 10 days after consummation of the lease
Which of the following criteria is used to judge whether a practice or act is unfair?
a. A business has a practice of providing a good or service at a higher cost to consumers than competing goods or services
b. A business has a practice of not providing a good or service in multiple outlets accessible to consumers
c. A business has a practice of allowing changes in terms after contract consummation
d. A business has a practice that violates public policy as determined by a court of law
Since coming on board as compliance officer a few months ago you have been reporting to the bank's Chief Credit Officer. At a meeting, the Chief Credit Officer (your boss) expresses his concern that he may not be the appropriate place in the organization for the compliance officer function to be reporting to. What would be the BEST response to him?
a. Reassure the boss that you think reporting to him is perfectly fine
b. Tell him that the regulators require that a compliance officer report to the bank president and that you should too
c. Tell him that you don't care who you report to
d. Tell him that many banks have the compliance officer position report directly to the president in order to give the position sufficient authority within the organization
Bank B is a community bank heavily involved in consumer lending. It offers overdraft lines of credit, unsecured loans to creditworthy borrowers, and installment loans secured by automobiles and other consumer goods. The senior lender at Bank B believes that loans under $1,000 are too costly for the bank and would like to prohibit loans of this size as a part of bank policy. A minimum loan amount might adversely affect low-income consumers. What should the senior lender do to exclude such loans from bank policy without creating a fair lending problem?
A. Because loan minimums are not prohibited by law, the senior lender should write a policy prohibiting such loans and ensure loan officers make no exceptions.
B. The lender should not set minimum loan amounts in order to remain in compliance with the fair lending guidelines.
C. The bank should conduct an analysis to determine whether loans of under $1,000 are really too costly to make. If they are, the bank should then determine if there is any other way to meet the credit needs of consumers who would apply for these loans. If there is an alternative, this alternative method must be implemented. If there is no alternative, the minimum loan policy may be implemented.
D. The bank should have an informal policy regarding minimum loan amounts and allow each loan officer to implement it. Without a written policy, the bank can better protect itself against fair lending problems.
ACME National bank uses telephone solicitations to sell its debt cancellation contracts. The banker explains to the borrower the nature of the contract, gives an oral short form disclosure, receives the customers affirmative election orally, and sends the written long form disclosures and written affirmative election within three business days. Is the
bank in compliance with the telephone solicitation rules as they apply to affirmative elections? A. Yes, the bank has fulfilled all of its requirements.
B. No, oral affirmative elections are not acceptable.
C. No, the bank also must give the customer 30 days to cancel the contract.
D. No, telephone solicitations are not allowed for debt cancellation contracts.
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.
A bank must keep records of EFT disputes resolved for a period of:
a. 2 months
b. 1 year
d. 2 years
Which of the following loans requires a notice of special flood hazard?
Loan A is to be secured by a car-wash facility located in a special flood hazard area in a community where federal flood insurance is not available
Loan B is to be secured by a rental house not located in a special flood hazard area but in a community where flood insurance is available
Loan C is to be secured by a vacant lot located in a special flood hazard area in a community where federal flood insurance is available
A. Loan A
B. Loan B
C. Loan C
D. All the loans
Bob Richardson has had three loan applicants this morning:
1) Heather Smith, age 17, who needs a car loan for $9,500 for 3 years
2) John Bako, age 42, who would like a stock loan for $15,000 for 1 year
3) Maynard Williams, age 70, recently retired, who needs a $50,000 home improvement loan for 12 years Bobs bank uses a judgmental credit evaluation system. For which of these applications is Bob able to consider the 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
Which of the following actions is 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
First National Bank would like to adopt a recordkeeping system that complies with the requirements of Regulation O. Which of the following best describes the recordkeeping system required by Regulation O?
A. A system in which the bank annually surveys all executive officers of First National and its affiliates to determine the insiders' related interests
B. A system in which the bank asks all borrowers as loans are made whether the borrower is a related interest of an insider
C. A system that surveys insiders of First National annually and requires each insider to disclose his or her related interests
D. A system that requires an annual survey of affiliate insiders
First Nationals consumer leasing department placed an ad in the local paper that pictured a car with the caption, Sign a lease with us and pay only $275 per month. What other information must this ad have?
A. A statement that the transaction is not a loan
B. The total amount due at consummation or delivery, the number of payments required, and any required security deposit
C. The bank's policy regarding the purchase of the property by the lessee
D. Disclosures regarding required insurance
For which disclosure must a bank obtain a customers affirmative consent before delivery?
A. A hard copy of a right-to-cancel notice
B. An electronic credit card application disclosure
C. An electronic disclosure statement on a car loan
D. An electronic home equity early disclosure
First National Bank owns several pieces of real estate obtained through foreclosures. Two of these are homes that the bank would like to market and sell within the community. The bank will also provide financing for these homes. In addition, the bank owns an apartment complex that it is managing until it is sold. In relation to these properties, which of the following issues is NOT a Fair Housing Act issue?
A. Discrimination based on familial status in renting apartments
B. Accessibility of the apartment complex to handicapped persons
C. Whether potential buyers of the houses are being discouraged from looking at the houses because of race or ethnic background
D. Affordability of the apartments relative to the community immediately around the complex
With one exception, the following transactions are considered electronic funds transfers for purposes of Regulation E. Which transaction is NOT considered an EFT?
A. Withdrawing cash from a checking account through an ATM
B. Paying for groceries through a point-of-sale debit of funds from a checking account
C. Transferring funds from a savings account to a checking account at an ATM
D. Transferring funds from a savings account to a checking account by the customer's telephone call to a bank officer and asking for the funds to be transferred
Which of the following charges is generally considered to be a prepaid finance charge?
A. Points paid by the borrower in cash at closing
B. An application fee of $250 paid in cash at the time of application and collected from all applicants whether or not the application is approved.
C. A $300 fee for an appraisal in a real estate transaction
D. A $750 fee for a title policy in a real estate transaction
First National is subject to HMDA. Which of the following loans would First National report on its loan application register?
A. A refinancing of the balance of a home purchase loan made five years earlier, both loans will be secured by dwellings
B. A loan made to a couple, secured by their home, to pay for their children's education
C. A bridge loan made to a newly transferred executive of a local company
D. A loan made to construct a principal dwelling
Jonathan Frys debit card is stolen on October 1, and $100 is taken from his account on October 2. Jonathan notices that his card is missing on October 5. On October 8, $100 is taken from his account. On October 10, the bank sends his monthly statement on the account, showing the two unauthorized transfers. On November 3, $500 is taken from his account. On November 10, another statement on the account is mailed, showing the November 3 unauthorized transfer. On December 5, another $100 is taken from his account. On December 10, the bank sends the monthly statement on the account, showing the December 5 unauthorized transfer. On December 15, Jonathan notifies the bank of the cards loss. For how much of the loss is Jonathan liable?
Which of the following pieces of information must be included on a periodic statement according to Regulation E?
A. The financial institution's business days
B. The name of any third party to whom funds were transferred
C. A summary of the consumer's liability for unauthorized transfers
D. The balance in the consumer's account after each transfer
A senior officer of a bank is considering breaking with tradition and opening the main office for general banking business on Saturdays. Before making the final decision, he requests your input. Which of the following describes the Regulation CC implications of his proposal?
A. Saturday is not a ''business day'' under the regulation, and the funds availability schedule will not be affected.
B. Funds availability disclosures and lobby notices will have to be revised for all branches.
C. An extra day of interest on Saturday deposits will have to be paid.
D. Being open on Saturday will shorten hold periods and increase exposure to operating losses.
ACME National Bank has a Web site that lists the banks products and services. On its consumer loan page it lists debt cancellation contracts as an available product. What other disclosure must the bank place on this Web page?
A. None. Because it only lists the product, nothing else is required.
B. The short-form disclosures must be on the page.
C. The short-form disclosures must be available by a conspicuous link on the page.
D. The long-form disclosures must be on the page.
On January 10, ABC Bank decides to send an advertising piece to consumers in its local community to promote its home equity lines of credit. The ad will be sent via email. The banks home equity product has an interest rate based upon the national prime rate plus a five percent margin. However, the bank is offering a lower promotional interest rate that is fixed for six months. In the ad, the bank plans to disclose the promotional rate and the fact that it is valid for six months from the date of loan closing. The bank will also disclose an actual APR charged on this product during the previous November. Additionally, the ad will include a list of all the fees required to close the loan and the maximum APR that can be charged under the plan. Will this ad meet TILA requirements?
A. Yes, all required disclosures have been made.
B. No, the ad must include the fact that a security interest will be taken on the consumer's home.
C. No, the ad must include the specific index and margin upon which the rate is based.
D. No, the ad must disclose a rate used during the 30 days before the date the ad is transmitted.
For purposes of rescission, a bank must use the following definition of a "business day:"
a. Monday through Sunday
b. Monday through Friday excluding federal legal holidays
c. Any day that the bank is open to the public for conducting substantially all of its business functions
d. Monday through Saturday excluding federal legal holidays
Of the following loans made by a national bank, which loan is NOT covered by the OCC ARM regulation?
A. A loan to purchase a single-family dwelling to be used as a residence, secured by the dwelling with an adjustable interest rate b.
B. A loan made to purchase a mobile home to be used as rental property, secured by the home with a variable interest rate c.
C. A loan made to purchase an eight-unit apartment complex, secured by the building, made payable on demand with a variable rate of interest d.
D. A loan made to purchase a duplex, secured by the dwelling, amortized over 15 years with a 5-year maturity, at a variable rate of interest
Sam owes a balance of $5,000 on his credit card account at Bank B. His minimum payment is $150 per month. $1,000 of his balance is accruing interest at 3% (a promotional rate); the remaining balance is accruing interest at 14%. Sam received a bonus at work and submitted an additional payment of $500 on his account this month. Which statement is true regarding the banks responsibility for applying the extra payment?
A. If Sam specifies the balance to which the extra payment should be applied, the bank must honor his request
B. The bank should apply the extra payment to the balance accruing at the 14% rate
C. The bank may apply the extra payment at its own discretion
D. The bank should pay off the oldest balance first, regardless of the interest rate
State National Bank is making a loan to the ACME Corporation to be secured by ACMEs manufacturing plant. The banks loan is for $250,000. The appraised value of the plant is $750,000. The maximum amount of flood insurance available for a commercial building is $500,000. What is the least amount of flood insurance the bank must require under the Flood Regulations?
D. None of the above
The State National Bank credit card program includes an annual fee that equals a percentage of the average balance of the account during the previous year. Of the following statements, which is true regarding the Truth in Lending requirements applicable to this fee?
A. Truth in Lending prohibits charging a fee based on a percentage of a balance.
B. The bank must disclose in the initial application or solicitation either the fee amount or the percentage amount and identify the amount against which the percentage is based.
C. The consumer must affirmatively agree in writing to pay this fee before the bank can charge it.
D. The bank must give the consumer 30 days' notice every year before the fee is charged and allow the consumer to cancel the account before it is assessed.
For HMDA purposes, the term dwelling does NOT include which of the following?
B. Single family dwellings
C. Individual condominiums
D. Mobile homes not attached to real property
If a bank is charging a premium rate in a credit card solicitation, how must it disclose this rate?
A. In bold type and underlined
B. In a different color ink
C. In a different font
D. In 16 point type
First National Bank has a mortgage lending department that finances conventional mortgage loans and construction loans for individuals.
Loan A is a loan to Mr. Jones for temporary construction financing for his home. The term of Loan A is nine months. Once the home is built, Loan A will be paid by the funding of a new permanent mortgage to Mr. Jones. First National has no commitment to Mr. Jones to fund the permanent loan.
Loan B is made to Mr. and Mrs. Williams, also for the construction of a home. Loan B is structured so advances will be made on the loan for nine months, the expected construction period. At the end of that time, Loan B will automatically convert to a permanent mortgage.
Loan C is a loan to Mr. and Mrs. Danvers for the purchase of a home that will be used as a rental property. The loan will be secured by the home. Which of these loans is covered by RESPA?
A. Loan A
B. Loan B
C. Loan C
D. None of the loans
First National Banks mortgage department has a large escrow operation for taxes and insurance. At closing what may the bank require of the borrowers?
A. Pay all taxes due plus one full year of taxes in advance
B. Pay only the taxes due on the date of the closing
C. Pay the taxes due plus one-twelfth of the amount owing for the next year
D. Pay all taxes due plus one-sixth of the amount owing for the next year
Arthur Hadley has been a sergeant in the U.S. Army for five years. He has been stationed at an army base in the United States for the last three years. He has a banking relationship with a bank in the town where his base is located. Currently he has a car loan with two years remaining on its term and a credit card with a $1,200 balance at the bank. Both obligations were incurred after he entered into active military duty. Arthur received word that his unit is being sent overseas on a peacekeeping mission. He informs the bank officer that he would like to have his car loan stayed until he returns from his mission. He would also like to have his credit card balance stayed with no payments due until he returns. What is the bank required to do?
A. The bank must stay the installment loan payment obligation.
B. The bank must stay the credit card payment obligation.
C. The bank must stay both the installment loan and credit card obligations.
D. The bank is not required to stay either obligation.
How must most banks submit loan application registers to their federal supervisory agencies?
A. In machine-readable format
B. On the standard LAR form
C. In three copies with the required transmittal
D. In a separate package for each branch loan application
Which of the following is classified as a finance charge under Regulation Z?
a. Voluntary credit life insurance
b. Construction loan inspection fee charged during the construction loan phase
c. Late charges
d. Initial flood determination fee
When developing a training plan for commercial lenders, which of the following regulations is least important to include?
A. Equal Credit Opportunity, CFPB Regulation B
B. Home Mortgage Disclosure, CFPB Regulation C
C. Loans to Executive Officers, Directors, and Principal Shareholders of Member Banks, FRS Regulation O
D. Truth in Lending Act, CFPB Regulation Z
The consumer protections of Regulation E cover which of the following transactions?
A. A wire transfer made through the Fedline system by Bill Rogers to make his mortgage payment
B. A $250 automatic transfer made from Ben Stillwater's checking account to his savings account at the same institution
C. The check Mrs. Flower gave to the dress shop for her daughter's prom dress and used by the shop to collect information to send a one-time ACH debit to Mrs. Flower's account pursuant to a notice posted in the dress shop
D. The $175 loan payment made by Juan Pena to First National by depositing it in one of the bank's ATMs
First National is subject to HMDA. On which of these loans does First National have to report the interest rate spread on its HMDA LAR?
A. A loan to remodel a 60-unit apartment complex
B. A loan to renovate a rental property
C. An unsecured loan to purchase an investment property
D. A home improvement loan secured by a principal dwelling
A loan officer is making a first mortgage purchase-money loan to enable an individual borrower to purchase a triplex. The individual will live in the upper unit and plans to rent the lower two units of the triplex. The loan will be for $245,000 for five years. Why does RESPA NOT apply to this loan?
A. The loan is covered by Regulation Z
B. The loan is primarily for business purposes
C. The loan is for an amount that exceeds $25,000
D. The loan is secured by a first lien on a multifamily dwelling
According to the 2007 interagency statement on subprime mortgage lending, what should an institution offering mortgage loans to subprime borrowers provide before submission of an application?
A. Information on local residential real property values
B. Payment shock information
C. Truth in Lending disclosures
D. Initial escrow statements
Which of the following loans or applications is EXCLUDED from HMDA reporting?
A. Residential loans purchased on the secondary market
B. Loans secured by real estate that are made for purposes other than home purchase, improvement or refinancing
C. Loans on residential property in a flood zone when proof of flood insurance is not provided
D. Applications for refinancing when there is no increase in principal
Which of the following provisions is MOST likely to raise fair lending questions if found to be in a written loan policy?
A. Minimum income requirement
B. Maximum debt-to-income ratio
C. Policy against lending out of market area
D. Half-point loan discount for automatic payment plans
Which of the following communications would NOT be considered a deceptive communication under the Fair Debt Collection Practices Act?
A. Reporting a disputed debt to a credit bureau without reporting it as disputed
B. Giving the consumer a disclosure that this is an attempt to collect a debt and any information used will be used for that purpose
C. Sending the consumer a letter that appears to be a telegram from a debt collection service regarding his or her thirty-day-past-due account that requests payment
D. Sending the consumer a letter stating that the account will be sent to an attorney for legal action within 10 days, when no such action is actually intended
By what date must financial institutions submit their loan application registers to their federal supervisory agency?
A. March 31 of the year following the calendar year for which the data were compiled
B. March 1 of the year following the calendar year for which the data were compiled
C. February 1 of the year following the calendar year for which the data were compiled
D. April 1 of the year following the calendar year for which the data were compiled
The following are four consumer obligations secured by personal property at First National Bank:
Loan A is a $15,000 loan to Nancy Fraser, cosigned by Ellen Fraser
Loan B is a $26,000 loan to Bob Roberts, cosigned by Fred Phillips
Loan C is a $10,000 loan to Francis McDonald, secured by household goods owned by Cindy Page; Ms. Page has not signed the note or a guarantee for the loan
Loan D is a $7,000 loan to Mike Swanson, guaranteed by his father First National is obligated to give a cosigner notice on all but one of these transactions.
Which transaction does NOT require a cosigner notice?
A. Loan A
B. Loan B
C. Loan C
D. Loan D
During a recent compliance examination, regulators cited the bank for violations of various marketing regulations. How should the compliance professional FIRST respond?
A. Contact the bank's marketing manager to discuss the finding
B. Develop a policy requiring that all marketing materials be reviewed and approved by compliance before being published
C. Set up a training class for the marketing department
D. Review the marketing materials and applicable regulations to verify the finding.
Which of the following disclosures is NOT required on the itemization of amount financed?
A. The amount of proceeds distributed directly to the borrower
B. The amounts paid to others on behalf of the borrower
C. An itemization of the various types of finance charges
D. The persons to whom amounts are paid on the borrower's behalf
First National Bank has made a loan to Mr. Good, secured by margin stock, to purchase margin stock. He trades stocks frequently, makes substitutions on loan collateral regularly, and sometimes withdraws collateral and does not replace it. Must FNB ensure that margin requirements are met after every substitution and withdrawal?
A. Yes. The margin requirements must be met at all times.
B. No. If the margin requirements were met when the loan was made, there are no further requirements.
C. No. The bank is only required to ensure that withdrawals do not violate margin requirements; collateral substitutions are not covered.
D. No. In this case the margin requirement must be met only when the loan is renewed.
First National Bank had a legal lending limit of $150,000. On March 1 it had outstanding to ABC Company loans equaling $100,000. On that same day, it made a contractual commitment to lend to ABC Company another $50,000. The bankﾒs capital base deteriorated during the next three months, and by the time the bank was called on to fund its commitment to ABC Company, its lending limit had dropped to $125,000. Can the bank fulfill its commitment to ABC Company by lending the additional $50,000?
A. Yes, but only if it immediately sells a participation for $25,000 without recourse.
B. No. The bank's lending limit has dropped, and the loan cannot be funded.
C. Yes. Because the commitment was legal when it was made, it is still legal.
D. No, not unless ABC Company secures the additional $50,000 with readily marketable collateral.
If an advertisement for a lenders mortgage loan product states that we offer 15 and 30-year loans what additional disclosures are required by Regulation Z?
A. The terms of repayment, amount of the down payment (in a credit sale), and the APR
B. The APR and an example based on a $10,000 purchase price
C. The monthly payment amount based on a $10,000 purchase price and a maturity recently offered by the bank
D. No additional disclosures are required
First National Bank purchases a portfolio of consumer loans from a finance company. The bank discovers there are consumer credit obligations in the portfolio that have confessions of judgment and waivers of exemptions. What should the bank do?
A. Require the finance company to repurchase the contracts with the illegal clauses
B. Cancel the obligations that have these clauses
C. Refrain from enforcing the clauses
D. Enforce the clauses on a case-by-case basis
Venture Ltd. is a limited partnership. ABC Corp. is a general partner of Venture Ltd. In addition, Venture Ltd. has several limited partners, including XYZ, Inc., a subsidiary of ABC Corp. ABC Corp. is owned by Holding Company, Inc., and both ABC Corp. and XYZ, Inc., were chartered for and are principally engaged in providing services to Holding Company, Inc., an equipment manufacturing company. ABC Corp., XYZ, Inc., and Venture Ltd. all have loans with Sanderson Savings Association. Which, if any, of the loans must be combined?
A. ABC Corp. and XYZ, Inc., only
B. ABC Corp., XYZ, Inc., and Venture Ltd.
C. ABC Corp. and Venture Ltd. only
D. None of the loans must be combined
Which of the following does an extension of credit NOT include?
A. An advance by means of an overdraft or cash item
B. The making or renewal of any loan or granting of a line of credit
C. An advance against accrued salary
D. An acquisition of a note on which an insider is a maker, drawer, or guarantor
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
The following deposits were made on Monday at First National Bank:
Martha Smith, a new customer, deposited $150 in checks into her checking account, which she had opened the previous week
Jerry Williams, an established customer, deposited a $7,000 check from his father
Amanda Thomas, also an established customer, deposited her $600 IRS refund into her account What funds must be made available to these depositors on Tuesday?
A. $200 for each
B. $200 for Martha and Jerry; $600 for Amanda
C. $200 for Jerry; $600 for Amanda
D. $200 for Martha; $600 for Amanda
ABC National Bank regularly purchases mortgage loans from ACME Mortgage Company, a local mortgage broker. ACME places a mandatory arbitration clause in each of its mortgage documents. ACME believes this clause is necessary because of state laws governing arbitration. Is this clause a problem for ABC National?
A. No, unless other predatory or abusive lending practices are evident in the loans sold by ACME.
B. Yes, the clause is a sign of an abusive lender, and the bank should not purchase the loans.
C. Yes, the bank should make ACME strike the clause from future loans.
D. No, this is a common practice and the bank can ignore it.
Under Regulation M, what is a consumer lease?
A. Any lease of an amount greater than the threshold as annually adjusted
B. A consumer lease for the annually adjusted threshold or less with an option to own the property after the lease expires
C. A consumer lease for the annually adjusted threshold amount or less for the use of personal property
D. Any consumer or agricultural lease for the annually adjusted threshold amount or less
Greg Smith, a real estate lending officer at XYZ Bank, is planning to make a $500,000 loan to Milton Womack, a good customer, to purchase a piece of commercial real estate from a local real estate broker. The loan will have a loan-to-value ratio of 75 percent. Mr. Womack has offered Greg an appraisal given to him by the seller of the property. The appraisal is very complete and is approximately three months old. Greg would like to waive the normal appraisal requirement and simply have the original appraiser update the sellers appraisal because this would save Mr. Womack the money a new appraisal would cost. Can Greg legally use the updated appraisal? Why or why not?
A. Yes. Greg may use the appraisal provided it goes through the bank's established appraisal review process.
B. No. Greg may not use the appraisal because the appraiser was not engaged by another financial institution.
C. No. Greg may not use the appraisal because it is too old.
D. Yes. Greg may use the appraisal because it was done so completely, provided he knows the appraiser and has confidence in his work
How may a creditor legally obtain an assignment of the consumers wages in a consumer credit obligation?
A. By having the consumer execute a written assignment along with a disclosure statement concerning the effect of such an assignment
B. By the consumer's execution of an assignment that is revocable at the consumer's will.
C. By the consumer's execution of an assignment that is revocable on the consumer's filing of bankruptcy
D. By the consumer's execution of an assignment that is revocable by a signed judicial order
First National Bank received a notice from James Gilbert that a $500 electronic withdrawal from his checking account, which was shown on his monthly statement, appeared to be an error. What must First National do?
A. Investigate the error and make any corrections within 30 calendar days
B. Provisionally credit Mr. Gilbert's account for the $500, notify Mr. Gilbert of the credit, investigate the error, and make any corrections within 10 business days
C. Provisionally credit Mr. Gilbert's account for the $500 within 10 business days, notify Mr. Gilbert of the credit, investigate the error within 45 calendar days, and make any necessary corrections within 1 business day
D. Provisionally credit Mr. Gilbert's account for the $500 within 10 business days, investigate the error, notify Mr. Gilbert of the credit, and make any corrections within 30 calendar days
When is a bank NOT required to comply with the Fair Debt Collection Practices Act?
A. When it uses a name other than its own in the collection of its debts
B. When it uses the U.S. mail to contact defaulted loan customers of its correspondent banks
C. When it uses its own name to collect its debts and those of affiliated institutions
D. When it collects debts regularly for other institutions under a reciprocity agreement
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.
According to Regulation AA, when must a notice be given to a cosigner on a consumer loan?
A. When the credit application is given
B. With the copies of the documents, after they are executed
C. Within three business days of the execution of the loan documents
D. Before the cosigner becomes obligated on the loan
If a bank makes a loan that is in compliance with Regulation U, what will be the status of the loan at its consummation?
A. The loan will be in compliance until it is renewed, regardless of the reduction of the borrower's equity in the stock.
B. The loan will be in compliance only if the value of the stock remains within the margin requirements.
C. The loan will be in compliance unless the status of the stock changes (for example, margin or nonmargin)
D. The loan will always be in compliance until its maturity, regardless of the reduction of the borrower's equity in the stock, provided there are no substitutions or withdrawals that adversely affect the loan value.
The bank made a loan to a director of the bank in compliance with Regulation O at the time it was made. Now that the rates are lower for that type of loan, the director wants to restructure the loan at a lower rate. As the bank's compliance officer, you should advise the bank to:
a. Not change the loan, because it would be considered preferential treatment
b. Ask the director to pay off the loan and refinance it at another institution
c. Consider the loan request and follow the bank's credit policy for such modification
d. Amend the loan terms to the requested lower interest rate
How may a bank limit the definition of executive officer?
A. By strictly defining, in writing, the duties and responsibilities of the officers to be excluded from the definition
B. By passing a board of directors resolution setting forth the bank's definition of an executive officer
C. By requiring that those officers to be excluded from the definition not attend loan committee meetings or loan review meetings
D. By limiting the amount of confidential information given to those officers to be excluded from the definition
Which of the following items is required to be included in the Initial Disclosure provided to consumers for EFT services?
a. Circumstances under which information may be provided to third parties
b. Circumstances under which terms of the EFT service may be changed
c. Circumstances under which a consumer may discontinue the EFT service
d. Circumstances under which a consumer may request additional authorized users on the account
If a consumer wants to stop payment on a preauthorized EFT, the consumer must notify the bank...
a. At least 3 business days before the transfer is scheduled to occur
b. At least 1 day before the transfer is scheduled to occur
c. At least 14 days before the transfer is scheduled to occur
d. At least 10 days before the transfer is scheduled to occur
If a bank uses a staff appraiser to appraise property that secures loans at the bank, in which case would the appraiser most likely NOT be considered to be independent?
A. The appraiser is an employee of the bank's affiliated holding company
B. The appraiser is an employee of the bank's affiliated financial institution
C. The appraiser is an employee in the commercial loan department
D. The appraiser is employed by the bank but reports to the audit department
Elliot Pierce, a borrower at ACME bank, defaulted on his home loan. It is the seventh home he has owned in his life. Elliot defaulted because, although his job is stable, he decided that he overpaid for the house and he could rent an apartment and save more money. Elliot has defaulted on mortgages in the past and believes his credit will recover. The bank is planning to send Elliot a default letter. Does the bank need to send Elliot a homeownership counseling disclosure?
A. Yes, because it is Elliot's principal dwelling
B. No, because it is not Elliot's first principal dwelling
C. No, because Elliot's reason for default makes him ineligible
D. No, because Elliot has defaulted on loans before this one
The senior lender at ABC bank would like to make stated income mortgage loans (i.e., loans where the bank does not verify the applicants income) to mortgage customers, including subprime borrowers. Under the statement on subprime mortgage lending, which of the following is the best statement of the banks responsibility regarding this new program?
A. Due to the risks, it should not implement such a program for subprime borrowers
B. The bank should make a policy for this program that includes mitigating factors for the risks
C. The bank should set stringent debt-to-income ratios for these loans
D. The bank should establish workout procedures for such loans in advance of making them.
What is residual risk?
a. The level of risk before controls are applied
b. The level of risk that management elects to assume
c. The level of risk remaining after controls are applied
d. The level of risk assumed to be acceptable to the regulators
Which of the following is not considered a covered borrower?
A. An active member of the national guard
B. A 20-year-old college student who is the son of an Army sergeant
C. The ex-wife of an active Navy servicemember
D. The mother of a Marine serving overseas who lives with her son's family
Is the renewal of a loan considered to be a new extension of credit for purposes of valuing the collateral under Regulation U?
B. Yes, if any additional amounts are added to the loan balance
C. Yes, if any amounts other than interest, service charges, or taxes are added to the loan balance
D. No, a renewal is never considered to be a new credit
In determining a prepaid finance charge for a final APR calculation, a compliance officer notes an unusual settlement agent fee. What should the compliance officer FIRST determine?
A. Whether the fee will be prepaid
B. Whether the fee is a service, transaction, or activity fee
C. Whether the fee is charged in a comparable cash transaction
D. Whether the loan will be secured by a dwelling or a residential mortgage transaction
When must a bank provide its mortgage loan disclosure statement?
A. Only when requested by its federal supervisory agency
B. At any time when requested by a member of the public
C. For 30 days following receipt of a request from its supervisory agency
D. On an ongoing basis, by posting it in the lobby of each branch
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, ABC sends an adverse action notice to the applicantﾒs email address listed on the application. Using this procedure, what is ABC Bankﾒ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
Which of the following is NOT included in the definition of margin stock?
A. Stock traded on a national securities exchange
B. Nonmargin stock convertible to margin stock
C. Debt securities convertible to margin stock
D. Warrants to purchase margin stock
Juanita Brown has her home loan at ACME Bank. Her payment was due on December 1. It is now January 7. Must ACME send her a homeownership counseling notice?
A. Yes, all eligible borrowers must receive a notice before the loan is delinquent for 45 days unless a payment is made within that time.
B. No, the loan has not been delinquent for 45 days.
C. No, the notice is optional.
D. Yes, eligible borrowers should receive a notice when the loan is delinquent by 30 days
Which statement is NOT true regarding the application disclosure made by the lender on a home equity open-end plan?
A. Disclosure must be made at the time the application is provided
B. Disclosure must be in a form the borrower can keep
C. Disclosure must describe the security interest and warn that in the event of default the borrower could lose the dwelling
D. Disclosure must describe payment terms
Which of these transactions requires the earliest disclosure?
A. A $60,000 loan with a variable interest rate to purchase part of a municipal bond issue
B. A $15,000 closed-end loan with a fixed interest rate to build a swimming pool at the borrower's residence
C. A $150,000 loan with a fixed interest rate to purchase a residence
D. A $200,000 loan with a variable interest rate to purchase a residence
ABC Bank is assessing its product line in preparation for the January 10, 2014 implementation of the new Regulation Z Ability to Repay requirements for covered transactions. Which of its real estate products are going to be subject to the ATR standards?
a. ABC Home Equity Line of Credit
b. ABC Home Mortgage
c. Senior Dream Reverse Mortgage
d. ABC Build-it-Your-Way Construction Loan
Which of the following statements is true regarding the requirement that a creditor determine a borrowers ability to repay the loan?
A. Applies only to loans secured by the consumer's principal dwelling
B. Applies only to higher-priced mortgages
C. Applies to HELOCs
D. Applies to all closed-end dwelling-secured loans
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 the 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
Which of the following is the lenders responsibility if a lender does NOT conduct the settlement of a RESPA transaction?
A. The lender must obtain a copy of both the buyer's and seller's statements and keep them for five years after the settlement date.
B. The lender need not obtain or keep any HUD-1 Settlement Statements.
C. The lender must obtain a copy of the buyer's HUD-1 Settlement Statement and keep it for two years after the settlement date.
D. The lender must prepare the HUD-1 Settlement Statement and send it to the person conducting the settlement.
What insurance disclosures are required in the lease disclosure statement?
A. The types and amounts of coverage provided by the lessor and the cost to the lessee
B. The types, amounts, and estimated costs of recommended coverage even if not provided or paid by the lessor
C. The cost to the lessee
D. No insurance disclosures are required
What information must be on the loan application registers for home loans on property located within the banks metropolitan area?
A. The county, census tract, and metropolitan area of the property
B. The address, census tract, and metropolitan area of the property
C. The county, address, and fair market value of the property
D. The name, address, and metropolitan area of the applicant
In an open-end account that is NOT a home equity plan, which of the following does NOT have to be provided to the consumer?
A. An initial disclosure statement
B. A brochure with a transaction example of a $1,000 balance for six months
C. A periodic statement
D. A statement of billing rights
Flood insurance lapsed on a loan at First Bank on June 1. The bank sent the borrower a notice stating that flood insurance was required and giving the borrower 45 days (until July 15) to reinstate the policy or purchase a new one. If the borrower does not reinstate the flood insurance and the bank force places a policy and charges the borrower for the premium, what date should the force placed policy start coverage?
A. June 1
B. June 30
C. July 1
D. July 15
In state bank advertisements, on what must Fair Housing logos be placed?
A. Bank communications
B. Bank advertising
C. Advertising for home improvement loans
D. Bank lobby signs
First National Bank investigated Mr. Gilberts allegation of a $500 EFT error. The bank provisionally credited the account during the investigation. The bank determined that no error was made and notified Mr. Gilbert on April 5 of the results of the investigation. On April 6, the bank debited Mr. Gilberts account for $500, which before this debit had a balance of $700. On April 7, checks for $600 and $800 are presented for payment against the account, payable to third parties. On April 8, Mr. Gilbert comes into the bank to withdraw $100. What should First National do?
A. Return both the $600 and the $800 checks and honor the cash withdrawal
B. Pay both checks and honor the cash withdrawal
C. Pay the $600 check and honor the cash withdrawal
D. Pay the $600 check and refuse the cash withdrawal
A creditor receives a phone application for a home equity line of credit. Before the time period for mailing out the early disclosure and the Regulation Z-mandated brochure, the creditor reviews the applicantﾒs credit history and discovers the applicant will not qualify for the line of credit due to a bankruptcy filing last year. Which of the following BEST describes how Regulation Z treats this situation?
A. The creditor may wait and send the early disclosures and brochure with the adverse action letter required by Regulation B.
B. The early disclosures and brochure must be sent out within the required time period after receipt of the telephone application, even if the loan is declined within that period.
C. If the credit denial was made within 30 days after receipt of the telephone application, the creditor does not have to send the early disclosures and brochure.
D. If the credit denial was made within the period of time Regulation Z allows for mailing the early disclosures and brochure, the creditor does not have to send the early disclosures or the brochure.
First National Bank is a member of a multibank holding company. The bank makes ARM loans and occasionally purchases ARM loans from its affiliate national and state banks as well as from nonaffiliate banks. All of its own ARMs and well as those it purchases are subject to Regulation Z. Which of the following practices is NOT acceptable under the OCC ARM regulation?
A. The bank purchases loans from its state affiliate banks where the index on the loan is tied to First National's prime rate.
B. The bank makes loans to purchase single-family dwellings with interest rates that may be adjusted from time to time.
C. The bank links the interest rate indices on its own ARM loans to the national prime rate as published in The Wall Street Journal.
D. The bank requires its national bank affiliates to use the national prime rate as published in The Wall Street Journal as the index for any of the ARM loans it purchases.
When should a notice that a property is located in an area having special flood hazards typically be delivered to the borrower?
A. Only upon the borrower's request
B. A reasonable time in advance of the loan closing
C. At the loan closing
D. No later than 30 days after the loan closing
Marion Evanss bank debit card is stolen on March 1, a Tuesday. On March 2, $100 is taken from her account with the card. She notices that her card is missing from her purse on March 3 and begins a search for the card. On March 6, another $100 is taken from her account. On March 8, $500 is taken from her account. On March 10, she notifies the bank. For how much of the amount taken can Marion be held liable?
First National Bank just hired a new mortgage lender from another bank in town. The lender says that he's already registered as a Mortgage Loan Originator. What does FNB need to do with regard to that new lender to be in compliance with the SAFE Act?
a. Verify the lender's MLO number by inspecting a copy of the registration
b. Require the lender to re-register and obtain a new MLO number
c. Update the employment information on the Registry and submit new fingerprints if three years old
d. Go to the Registry and verify that the lender is on the list
A $7,000 check is presented to First National Bank, as the paying bank on Monday. First National is going to return the check to the depositary bank. Generally, First National mails return checks to the Federal Reserve Bank and mails its forward collection checks as well to avoid the costs of a courier. Other banks in the community send both return and forward collection checks to the Federal Reserve Bank by courier if the checks are over $5,000. Can First National follow its usual procedure in this case?
A. Yes. Provided the bank is consistent in its method of return, it does not have to use the most expeditious method.
B. Yes. Provided the bank uses the mail for forward collection, it can use the mail for returns.
C. No. The bank must use the method used by banks in similar circumstances.
D. No. The bank is always required to use the most expeditious method of return
When may a debt collector communicate with third parties about the consumer?
A. If the consumer has defaulted on the credit obligation
B. To determine the consumer's employment
C. If the collector identifies himself or herself as a debt collector
D. To determine the consumer's location
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
When may a bank pay an overdraft of $5,000 created by an executive officer of the bank?
A. When the officer is at the level of a vice president or lower.
B. When the officer has previously signed an overdraft protection credit agreement in an amount sufficient to cover the overdraft.
C. When the officer has enough funds in another account to cover the overdraft.
D. When the bank pays the overdrafts for other good customers in the ordinary course of business.
Martina Ruiz has an individual car loan at the bank. She makes monthly payments of $525 and has three years left on the term. She informs the bank that her husbands U.S. Navy Reserve unit has been activated, and he will be gone for an indefinite period of time. His annual income will now be much less than it was previously. Ms. Ruiz asks the bank to lower the interest rate on this loan to six percent and lower the payments accordingly. Does the bank have to comply with this request?
A. Yes. If Ms. Ruiz can prove that her husband's military service materially affects her ability to repay the loan, the bank must lower the interest rate and the payments.
B. No. Unless Ms. Ruiz herself is undertaking military service, the bank is not under any obligation to make an accommodation on the payments.
C. Yes, but only if Ms. Ruiz agrees not to drive the car during the duration of her husband's military service.
D. No. Unless her husband makes the request, the bank does not have to comply.
Mrs. Walters uses her ATM card each week to withdraw cash. To remember her access code, she writes it on the card in permanent ink. On March 1, her card is stolen. On March 2, $500 is taken from her account. On March 3, she notices the card is missing and notifies the bank the same day. Later on March 3, another $100 is taken from her account. For how much of the loss is Mrs. Walters liable?
B. $600, because she was negligent in writing her access code on the card
D. $500, because she was negligent in writing her access code on the card
A consumer customer reports to First National Banks credit card department that his credit card periodic statement contains an amount that is incorrect. What should the bank do?
A. Begin an investigation of the alleged error but require the consumer to pay the disputed amount pending the completion of the investigation
B. Conduct an investigation and mail within 30 days an acknowledgment of the error notice, a correction of the error, or a notice that there is no error
C. Complete an investigation of the error in no more than 60 days
D. Conduct a reasonable investigation of the alleged error and report the disputed amount to the credit bureau as delinquent
What explanation should a banks Affiliated Business Arrangement disclosure statement include?
A. A consumer's rights to file a complaint with HUD against the lender
B. The mortgage services dispute resolution procedures under RESPA
C. The Computer Loan Origination (CLO) system
D. The nature of the relationship between the referring party and the service provider
Of the following loans, which one would NOT be considered a federally related mortgage under RESPA?
A. A purchase loan to a consumer secured by a mobile home and lot
B. A purchase loan to a consumer secured by a condominium
C. A business loan to a corporation secured by a one- to four-family dwelling
D. A home improvement loan to a consumer
You are doing a review of the bank's consumer deposit account periodic statements for Regulation E compliance. As part of the review, you should check for:
a. The actual date the transfer was conducted
b. The authorization code for the transaction
c. The total amount of credits applied
d. The amount of any fees assessed for EFTs
On which of the following deposits is a bank NOT required to give next day availability?
A. A cashier's check deposited at a proprietary ATM
B. A Social Security check received through the mail to be deposited in the payee's account
C. U.S. Postal Service money orders deposited in person to the payee's account
D. Cash, where the deposit was made in person to a teller at the depository bank
ACME Bank is a state nonmember bank with all of its offices in one state. However, it also has an Internet Web 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ﾒ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 that 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 the 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.
A bank has a large mortgage department as well as a high HMDA error rate. An expensive software program could automate the process, but the business unit manager does not want to purchase the software because of its expense. Though it is not as efficient, the manager prefers to make some improvements to the manual process, add some more robust monitoring procedures, and opt not to purchase the software. What should the compliance professional do?
A. Elevate the issue to a higher authority to force the mortgage department unit to purchase the software
B. Nothing; the compliance professional's job is done with the completed research
C. Document the fact that the level of risk present with manual systems is acceptable to the mortgage department business unit
D. Write a memo to the president of the bank that explains the risk assessment for this area
ABC Bank is pulling together an implementation team for the new TRID disclosures that take effect on October 3, 2015. Which of the following loan product managers does NOT need to be included in the implementation meetings to plan for the new disclosures?
a. Home Equity Line of Credit product manager
b. Consumer Construction Loan product manager
c. Retail Mortgage Loan product manager
d. Secondary Market Mortgage Loan product manager
Under Regulation U, prior to extending credit secured by margin stock for more than $100,000, a national bank must obtain which of the following?
A. Certificate of value for the collateral
B. Written statement from the borrower as to the purpose of the loan
C. Written statement certifying the borrower's business address and daytime phone number
D. Notice from the borrower as to his willingness to provide additional margin stock as collateral
First National Bank, with assets of $60 million, is located in a large urban area (which has been designated as an MSA). Which of the following is true of the banks fair housing recordkeeping requirements?
A. It must keep an Inquiry/Application Log of all home loans and home improvement loans.
B. It does not have to keep any records unless it had at least 50 applications for home purchase loans during the previous calendar year.
C. It must keep monthly information on all home loan applications (including purchase, permanent financing, and refinancing) regarding the number of applications received, the number denied, the number withdrawn, and the number of loans closed.
D. It must keep its HMDA LAR updated quarterly.
As a general rule, how is the lending limit for a national bank or savings association BEST described?
A. 15 percent of capital and surplus for unsecured loans, up to an additional 10 percent of capital and surplus for loans fully secured by marketable collateral, and no limit on loans permitted by exception
B. 15 percent of capital and surplus for unsecured loans or 25 percent of capital and surplus for a combination of unsecured loans, loans fully secured by marketable collateral, and loans permitted by exception
C. 15 percent of net surplus for unsecured loans, 10 percent of net surplus for loans fully secured by marketable collateral, and no limit on loans permitted by exception
D. 25 percent of total capital and surplus for all loans
John and Elise Fernandez apply to ABC Bank for a loan to purchase a manufactured home. ABC Bank is a community bank with approximately $100 million in assets, and the home would be located outside of the banks metropolitan area. Mr. and Mrs. Fernandez complete an in-person application for a mobile home that is denied by the bank due to insufficient income. Which piece of information on the Fernandez application is ABC Bank NOT required to report on its HMDA LAR?
A. The ethnicity of the applicants
B. The race of the applicants
C. The purpose of the loan application
D. The metropolitan area where the home will be located
John Downey has a mortgage at First National that is covered by the Homeowners Protection Act of 1998. His loan has a fixed rate. On October 1, 2015, his loan will be half-way through its amortization schedule. If the loan still has PMI on it at that point, and his payments are current, what is First Nationals responsibility?
A. The bank has no responsibility to do anything.
B. The bank must terminate the PMI and notify the borrower.
C. The bank must notify the borrower and give him a chance to request termination of the PMI.
D. The bank must provide a new annual disclosure statement within 30 days.
A customer calls to notify the bank that a withdrawal made at an ATM located in a local supermarket has been debited from the wrong account. The bank employee applies the point-of-sale error resolution procedures. What should the bank do?
A. Ask the supermarket to credit the customer's account
B. Freeze the customer's account until the problem can be resolved
C. Retrain the employee to distinguish point-of-sale transactions from ATM transactions
D. Provide immediate credit, and file a SAR
One of the basic elements of a compliance program is:
a. A full-time compliance officer who is a CRCM
b. Ongoing monitoring to evaluate the program's adherence to compliance policies and procedures
c. Monthly reporting to the board of directors
d. Access to outside or inhouse legal counsel
First National Bank would like to establish a policy regarding the evaluation of loans that are not subject to the appraisal requirement. Which of the following is acceptable in this policy?
A. All loans under $250,000 secured by real estate must have an evaluation in the file.
B. All loans that do not require an appraisal by a state-certified appraiser must have an evaluation.
C. The evaluations generally will be performed by the loan officer responsible for the transaction.
D. Evaluations may be performed by any loan officer in either commercial or consumer lending as well as any credit analyst
Which of the following actions is NOT considered abuse or harassment under the Fair Debt Collections Practice Act?
A. Publishing a list of consumers who allegedly refuse to pay debts
B. Using obscene, profane, or abusive language when calling a consumer
C. Providing a toll-free number for the consumer to call to inquire about the debt
D. Calling a consumer every hour on the hour
How often must a national bank or savings association calculate its lending limit?
A. Every day
B. At the end of each quarter or when its capital changes
C. Every time it files the Consolidated Report of Condition and Income (call report)
D. At the end of each month
What is the required timing for giving notice to customers regarding a change to a bankﾒs Regulation CC funds availability policy that improves or expedites availability?
A. At least 15 days prior to implementation
B. At least 30 days prior to implementation
C. No later than 15 days after implementation
D. No later than 30 days after implementation
Which of the following persons would be a Mortgage Loan Originator under the terms of the SAFE Act?
A. A real estate agent who assists clients in completing loan applications before turning them over to a lender
B. An administrative assistant to a loan officer who sends information requests to loan applicants to facilitate the loan process
C. A broker who takes applications and assists the applicant in choosing a mortgage product before sending it to a lender for underwriting
D. A customer service representative in a bank who refers applicants to the mortgage department
Stacey Robertson is in the Army Reserve. She has just heard that her unit is being activated, and she will be leaving the country for an indefinite period of time. Her salary in the Army will be close to the salary she has in civilian life. What options does she have under the SCRA to improve her financial situation before she leaves?
A. Ask the bank to lower the rate on her installment loan
B. Request a mandatory freeze on the rent she must pay for her apartment
C. Ask her credit card company to suspend charging interest pending her release from active service
D. Apply for assistance from a special SCRA fund that can cover interest payments while she is on active duty
When must a notice be received from a consumer in order to be considered a billing error notice?
A. Within 30 days after the transaction that is the subject of the alleged error
B. Within 90 days after the first statement that reflected the error
C. Within 60 days after the transaction that is the subject of the alleged error
D. Within 60 days after the first statement that reflected the error
Which of the following situations is NOT considered a billing error?
A. The failure to credit a payment
B. The inclusion of a charge for an item not purchased by the consumer
C. The inclusion of a charge for an item the quality of which dissatisfied the consumer
D. The inclusion of a charge for an item delivered to the wrong location
Bank C is a $250 million bank in a large city. Recently the compliance officer of Bank C performed a review of consumer loans made during the previous 12 months. She also reviewed adverse action notices generated during the same period. She compared denied applications for persons with Hispanic surnames to loans made to persons without Hispanic surnames. She noted that in some cases the credit histories of loans on the books were similar to those of applicants denied for delinquent credit. What should be a concern for this compliance officer?
A. That there were too many loan applications denied
B. That the bank is engaging in disparate treatment
C. That the bank's practices are having a disparate impact on the community
D. That the bank's credit standards are too vague
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
A customer deposits a $7,000 local check and a $12,000 U.S. Treasury check in the bank on Monday. The banks policy is that it generally makes funds from checks available on the next business day, although it does place exception holds. When does the bank have to make these funds available?
A. $5,000 is available on Tuesday; the rest is available within a reasonable time period
B. $500 is available on Tuesday; $4,500 is available on Wednesday; and the remaining is available within a reasonable time period
C. $5,200 is available on Tuesday; $4,800 is available on Wednesday; and the remaining is available within a reasonable time period
D. $12,200 is available on Tuesday and $6,800 is available on Wednesday
Which of the following statements is true regarding the lessees ability to purchase the leased property?
A. The lessor must allow the lessee to purchase the leased property either during the lease term or at the end of the term.
B. If the lessor allows the lessee to purchase the property at the end of the lease term, the lessor may not charge more than the equivalent of 12 monthly payments for the property.
C. If the lessor allows the lessee to purchase the property at the end of the lease term, the purchase price must be disclosed in the initial disclosure statement.
D. The purchase price of the leased property must be mutually agreed on by the lessor and the lessee.
In evaluating the coverage of a banks Regulation U compliance for loans to purchase or carry margin stocks, which of the following securities is NOT covered in the regulatory definition of margin stock?
A. Any OTC stock
B. A security issued by an investment company that is licensed under the Small Business Investment Act
C. A warrant or right to subscribe to, or purchase, a margin stock
D. An equity security registered, or having unlisted trading privileges, on a national exchange
Milton Edwards leased an automobile from First National Bank. The lease contained a provision whereby Milton would be liable for the automobile at the end of the lease based on its fair market value. At the end of the lease, the bank notified Milton that the value of the automobile, based on industry publications, was $10,500 and required him to pay that amount to obtain ownership of the property. Milton objected and requested that the car be individually appraised. What must the bank do?
A. Nothing; an estimate of the value based on industry standards is sufficient
B. Hire an independent appraiser to appraise the automobile (both parties agree to be bound by the appraisal)
C. Allow Milton to hire an independent appraiser to appraise the automobile (both parties agree to be bound by the appraisal)
D. Use the average of the car value as determined by a third party appraiser Milton hires with the original bank appraisal
Regulation B defines 'elderly' as having attained an age of how many years?
B. 59 1/2
D. 70 1/2
A collector at First Collection Company has not been able to reach John, a consumer, at home. The collector obtains Johns work telephone number and calls him at work. John tells the collector not to call him at work again because personal calls are prohibited by his employer. What should the collector do?
A. Tell John that he must provide such a prohibition in writing before it will be effective
B. Refrain from calling John at work
C. Tell John that calls to him at work will cease if he can be reached at another place
D. Ask John to have his employer's representative call the collector to verify the statement
Which of the following would be prohibited used of medical information pertaining to a consumer in connection with determining the consumer's eligibility for credit?
a. Consideration of a consumer's terminal illness in deciding to deny a loan request
b. Consideration of a consumer's medical debts to a care facility specializing in terminal illnesses in overall debt calculation
c. Consideration of a consumer's disability income and other income in relation to total debt
d. Consideration of a consumer's past due debts to a medical supply company for medical equipment to disqualify the loan request
Which one of the following would NOT be a key compliance risk indicator?
a. Management experience
b. Staff turnover
c. Season of the year
d. Transaction volume and size
Which of the following institutions is NOT subject to the coverage of HMDA?
Bank A, with assets of $55 million and located in a large urban city, makes home improvement loans and some home purchase loans to existing customers, but no mortgage loans
Bank B, with assets of $20 million and located in a rural area, has several branches, also in rural areas, including one that makes home improvement and home purchase loans
Mortgage Company C, with assets of $75 million and a home office in a large East Coast city, makes exclusively home purchase loans.
A. All the institutions are subject to HMDA
B. Bank A
C. Bank B
D. Mortgage Company C
The Bank received a notice of garnishment on one of their consumer deposit accounts. What is the first thing the bank should do?
A. Conduct an account review to determine if there have been any Federal benefit payments
B. Follow their usual garnishment procedures
C. Notify the account holder
D. Examine the order for a Notice of Right to Garnish Federal Benefits
Under which circumstance would a creditor be allowed to refuse to renew an alternative mortgage parity transaction?
A. The borrower made a late payment twice during the first five years of the transaction.
B. The borrower refused to keep the house insured for hazards.
C. The information on the borrower's past employment history was incorrect by one month.
D. The borrower has asked for interest rate relief.
A collector for First Collection Company, located in Chicago, makes calls to consumers all over the country. He is responsible for 50 past-due accounts. Each day he begins calling all his accounts on a rotating basis. What time constraints should he follow?
A. He should not call consumers anywhere in the country before 8:00 a.m. Chicago time.
B. He should not call any consumer before 8:00 a.m. at the consumer's location.
C. He should not call any consumer before 9:00 a.m. at the consumer's location.
D. He can use any time zone in the continental United States as the basis for the time restrictions, and he should not call any consumer before it is 8:00 a.m. in the chosen time zone.
For which of the following must a bank obtain Form FR U-1 when a loan is in excess of $100,000?
A. A loan made to purchase margin stock
B. A loan secured by margin stock
C. A loan made to purchase margin stock and secured by margin stock
D. A loan secured by stock (either margin or nonmargin)
Which of the following is NOT a prohibited basis of discrimination under the federal Fair Housing Act?
D. Sexual orientation
The Fair Credit Reporting Act Notice to Home Loan Applicants must be provided to:
a. All consumers whose applications for personal purpose credit secured by a principal dwelling are denied
b. All consumers who apply for a home loan
c. All consumers who apply for a home loan and are turned down because of information contained in a consumer report
d. All consumers who apply for a home loan in which the creditor uses a consumer credit score
Which of the following credit arrangements would most likely be considered a purpose credit because it is indirectly secured by margin stock?
A. A loan made to purchase margin stock secured by nonmargin stock
B. A loan made to a company for various corporate purposes, including the purchase of margin stock, secured by the corporate assets, which from time to time include margin stock; on the date of the consummation of the transaction approximately 10 percent of the assets of the company are margin stock
C. A loan made to purchase margin stock, guaranteed by an individual who has pledged margin stock as security for the guarantee
D. Bank is the trustee for a qualified pension plan from which the participants may borrow and use their interest in the plan as security; a participant borrows money for the purpose of purchasing margin stock
Title Co., Inc., has a business relationship with First National Bank in that Title Co. keeps a large certificate of deposit at the bank at an interest rate substantially below the market rate. In return, the bank refers to Title Co. its mortgage loan borrowers for settlement services and to purchase required title insurance. Title Co.s rates are very competitive. If the bank discloses the relationship to the borrower, is this arrangement legal under RESPA?
A. Yes. Borrowers would pay the same price for title insurance and settlement at another title company anyway.
B. No. The bank is receiving value in the below-market-rate CD, essentially a referral fee for settlement services.
C. Yes. The bank discloses the relationship on the Good Faith Estimate.
D. No. The bank cannot require title insurance on mortgage loans.
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.
Which of the following is exempt from the lending limit rules?
A. Residential housing loans
B. Derivative transactions
C. Securities borrowing
D. An eligible bankers acceptance
Sonia Rice has a car loan at First National Bank. She often makes her payments late. She currently owes late charges of $50, $25 of which was incurred two months ago, and the rest was incurred before that time. Her normal installment payment is $350. She sends in a payment of $365. What should First National do with the payment?
A. Apply the first $50 to late charges, the next $315 to the regular payment, and send Sonia a bill for the remaining payment, giving her a 10-day grace period to pay the remaining $35
B. Apply the first $350 to the regular payment and the next $15 to accrued late charges
C. Apply the first $50 to late charges and the remaining $315 to the regular payment. Then apply another late charge to the past-due portion of the regular payment.
D. Apply only enough to cover the most recently incurred late charges ($25) and apply the remainder to the payment
If a bank completes an investigation of an alleged billing error and determines that no billing error occurred and the consumer owes all or part of the amount, what must the bank do?
A. Immediately report to the credit bureau the amount that was the subject of the investigation as delinquent
B. Disallow any free-ride period normally given to the consumer on the account for amounts owing periodically and require the consumer to make the payment immediately
C. Send the consumer a notice that explains why no billing error occurred
D. Require the consumer to produce documentation for any future billing error notices
Eleanor Mumford is an advertising account executive. She is also a pilot in the Air Force reserve. She has a car loan with a five-year term at a 9 percent interest rate and a credit card with a $5,000 balance at 12 percent annual interest. Her unit has been activated, and she will be leaving for military service. Her military pay will be less than half her civilian pay. She writes to the bank and asks that the bank lower her interest rates on the credit card and car loan for the duration of her service to six percent. She asks for her monthly car payment to be lowered also. She sends along proof of her activation and military pay scale. What does the bank have to do?
A. The bank must lower the credit card and car loan interest rates but does not have to lower the car payments.
B. The bank must lower both rates, and the car payment must be lowered to account for the new interest rate.
C. The bank has to lower only the credit card interest rate.
D. The bank does not have to do either.
A bank proposes to pay a $50 referral fee to bank employees for referring home mortgage loan applicants to an affiliated mortgage company by providing a mortgage application and an Affiliated Business Arrangement disclosure. What does RESPA permit that makes this practice acceptable?
A. A mortgage affiliate can reimburse the bank for referral fees paid to bank employees for an originated loan
B. A mortgage affiliate can reimburse the bank for referral fees paid to bank employees if an Affiliated Business Arrangement disclosure is approved
C. A bank can pay nominal referral fees to its own employees because a bona fide service is being performed based on an application being provided
D. A bank can pay referral fees to its own employees when an Affiliated Business Arrangement disclosure is provided
Which of the following activities of First National Bank would most likely be covered by the Fair Debt Collection Practices Act?
A. Collection of consumer credit accounts that the bank originated in its consumer lending department
B. Servicing of mortgage loans originated by First National and sold to investors
C. Servicing of a consumer loan portfolio under contract to an investor who purchased an entire portfolio of consumer loans from a failed bank
D. Collection of consumer credit contracts purchased from automobile dealers
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 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 Insurance's products. The bank sends the qualified customers an FSB Insurance 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
Value Inc. is a federally regulated AMC and a subsidiary owned and controlled by ABC bank, a federally insured depository institution. Value Inc. is subject to all of the following requirements EXCEPT:
A. The company must register with the State appraiser and certifying licensing agency in all states in which it operates
B. The company must maintain compliance with valuation independence standards set forth in the Truth in Lending Act
C. The company must require that all appraisals comply with USPAP
D. The company must verify that only State-certified or State-licensed appraisers are used for Federally related transactions
What is the purpose of the lending limit regulation?
A. To ensure that banks and savings associations do not lend out more money than they receive from depositors
B. To promote safety and soundness by preventing an excessive amount of loans to one person or related persons
C. To promote competition between lending institutions
D. To require banks and savings associations to prohibit lending to certain identified industries
Under Regulation E, which of the following pieces of information must be included on an ATM receipt?
A. The account balance
B. The location of the terminal
C. The time of day the transfer occurred
D. The fact that the transaction will overdraw the account
A banks compliance officer received a complaint from a credit card customer indicating that she received her credit card statement and noted that her credit limit had been reduced to less than the balance she owes. She claims that she was charged an over-the-limit fee before she was informed. The compliance officer reviewed the statement and determined that the customer was correct. If the bank determined that the credit limit should be lowered, what should it have done?
A. Charge over the limit fees until the balance owed falls below the credit limit
B. Notify the customer that they were terminating the account
C. Provide notice 45 days before the decrease to the credit limit
D. Suspend future credit privileges
Martha Ramirez has a credit card with ABC Bank. ABC notified Martha that it will increase the APR on her card account for all new purchases after August 1. On August 1, Marthas outstanding balance is $1,500. On August 10th she charged $300. What is the term used to describe the $1,500 balance outstanding on August 1?
A. Average outstanding balance
B. Protected balance
C. Computed balance
D. Previous balance
When is the purchase of flood insurance required on or before loan closing?
A. Construction mortgage loan is to be secured by a single family dwelling in a participating community
B. Conventional mortgage loan is to be secured by an attached mobile home in a special flood hazard area of a nonparticipating community
C. Conventional mortgage loan is to be secured by a vacant lot located in a special flood hazard area of a participating community
D. Business mortgage loan is to be secured by a commercial building located in a special flood hazard area of a participating community
First National Bank would like to automatically increase the credit card interest rate for customers who pay late three or more times in six months on their credit card or on any other loan, including on loans with other creditors. What must the bank do to be in compliance with the Credit Card Practices guidance?
A. Explain in promotional rate materials, the application, and the agreement the specific reasons the rate might increase automatically
B. Notify all customers in advance when the rate increases
C. Allow customers 90 days to close their accounts and pay the balance at the original rate, when the bank increases the interest rate due to late payments
D. Not raise the interest rate based on customers' delinquencies on loans to other creditors
A compliance professional is a member of the task force studying how the bank can reduce customer complaints about holding deposits. One proposed solution involves purchasing an expensive system that will reduce the number of holds placed by evaluating the customers history and relationship with the bank. Which of the following roles is MOST important for the compliance professional on the task force?
A. Developing training for tellers who will use the new system
B. Setting parameters for what the system should review to determine the strength of the customer relationship
C. Validating the system to ensure it complies with regulatory restrictions
D. Conducting a cost-benefit analysis to determine if the system is the best solution
First National Bank made the following loans to Mr. James Wilson during the previous calendar year:
Loan A, made on February 2, is a loan for purchasing margin stock and is secured by margin stock
Loan B, made on March 15, is also for purchasing margin stock and is secured by margin stock
Loan C, made on June 30, is an unsecured loan for purchasing margin stock
Loan D, made on September 10, is for purchasing a car, secured by the car All the loans are still outstanding at the end of the year.
Which of the loans must be combined for purposes of the margin requirements of Regulation U?
A. All of the loans must be combined
B. Loans A and B
C. None of the loans must be combined
D. Loans A, B, and C
Which of the following statements is true regarding providing credit cards accounts to cardholders under the age of 21?
A. Accounts can only be issued to cardholders who are at least 21
B. Co-signers are required on credit card accounts to consumers who are under 21
C. The consumer must submit a written application
D. Consumers must be provided with credit counseling prior to card issuance
The Bank received a notice of garnishment on John Does account. There is a balance of $530 on the date the notice was received. Two weeks prior to the receipt of the notice, a direct deposit of $750 was deposited into Mr. Does account representing his monthly benefit from the Social Security Administration. Which of the following actions is now permissible for the bank?
A. Follow its normal garnishment procedures
B. Process Mr. Doe's pending insurance ACH payment
C. Assess its normal $25 garnishment fee
D. Transfer the account balance to a holding account pending the garnishment resolution
A compliance officer is monitoring a financial institutions 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
Safe National Bank has a variety of consumer lending products. Among them are debt cancellation contracts that allow for the cancellation of a consumers debt if certain events happen. The bank solicits sales for these contracts when the consumer makes an in-person loan application. What does Safe National have to do at the time of the application and solicitation?
A. Nothing. Disclosures are required only when the contract is made.
B. Give the customer the short-form disclosures orally.
C. Give the customer the short-form disclosures in writing.
D. Give the customer the short form disclosures orally and the long-form disclosures in writing.
A banks president would like to begin offering a new home equity line of credit product within two weeks. In all cases the borrowers principal dwelling will secure the loan. The president has already launched a planned advertising campaign for the banks major service markets. What should the compliance professional do FIRST?
A. Hire an attorney to write the appropriate legal documents and disclosures
B. Write a memo to the president explaining why the compliance professional should have been in on the process at an earlier date
C. Begin training sessions for the lending and loan operations staff on the compliance issues involved
D. Perform a risk assessment to determine the bank's level of risk in offering this new product
First Collection Company is collecting a debt from Louetta Pierce. Ms. Pierce informs the company that she has hired an attorney to represent her. She gives the collector the attorneys name and address. The collector calls the attorney and leaves three messages with the attorneys secretary over a two-day time period. Each time the secretary states that the attorney will call that day. He also sends a letter requesting that the attorney call him. Four days pass and he hears nothing. What can the collector do?
A. He can call Ms. Pierce directly about the debt.
B. He must make at least one more attempt to contact the attorney by phone; three phone calls over a two-day time period are not enough.
C. He should send a registered letter to the attorney stating that if the attorney does not contact the company, the collector will call Ms. Pierce directly.
D. He should visit the attorney in person if the attorney is in the same city.
In a review of a bank's compliance with the Regulation O overdraft provisions, what should the compliance officer do?
A. Identify the related interests of all directors, executive officers, and principal shareholders
B. Examine the bank's overdraft reports for a selected time period
C. Examine the annual FFIEC-004 reports on indebtedness to correspondent banks
D. Examine the bank's latest report of condition and income
A borrower whose loan has private mortgage insurance (PMI) may request the lender to cancel the PMI under which of the following circumstances?
a. In writing on or after the cancellation date if payments are current
b. At any time during the life of the loan
c. At any time during the life of the loan when payments are current
d. Verbally on or after the cancellation date
First National Bank is expanding its deposit services and would like to send out debit cards to a group of its customers. However, these cards have not been requested by the customers and the bank does not want to violate Regulation E. How can First National accomplish this?
A. No cards may be sent except in response to a request. The bank must send letters soliciting a request for the cards.
B. Cards may be sent if they are not validated, if disclosures of consumer's rights are enclosed, and if the card can only be validated by a request from the consumer with proper identification.
C. No cards may be sent and no direct solicitation for cards may be made. The bank must rely on general advertising.
D. Ready-to-use cards may be sent to the customers provided proper disclosures of the consumer's rights are included along with a notice that use of the card will validate it for all purposes.
Under which of the following conditions must a HUD-1 Settlement Statement be given to the borrower at the time of settlement in a RESPA transaction?
A. When the borrower waives the right to receive a statement
B. When the borrower does not attend the settlement
C. When the borrower prepays all settlement costs
D. When there is no settlement meeting between the parties
Which of the following items is considered to be household goods in Regulation AA?
A. A painting commissioned by the consumer
B. A living room sofa and chairs
C. Stereo equipment, including a receiver, speakers, cassette, and CD player
D. A diamond necklace
Which statement is true regarding a consumers right to rescind an open-end credit transaction?
A. Right of rescission applies only to transactions secured by the consumer's principal dwelling.
B. Right of rescission applies separately to each advance of funds made under a home equity plan.
C. Right of rescission can be made orally or in writing.
D. Notice of right of rescission is made only to the primary borrower.
First National Banks mortgage department generally requires the purchase of PMI when the borrower is making less than a 20 percent down payment. Which of the following disclosures is NOT required in connection with PMI?
A. A Good Faith Estimate
B. An initial PMI disclosure
C. An annual disclosure of the borrower's PMI rights
D. A notice when the mortgage reaches its half-way point
Of the following types of data, which one is NOT required to be reported for each application for an originated loan subject to Regulation C?
A. Purpose of the loan
B. Race, ethnicity, and sex of the applicant
C. Type of action taken and the date
D. The interest rate on the loan
Which of the following is NOT a required disclosure on a loan secured by a dwelling?
B. Interest Rate
C. Government monitoring information
D. A statement that there is no guarantee the loan can be refinanced
Bank A offers a special senior citizen deposit package of benefits that includes free checks, free travel agency services, and a credit card with no annual fee. Bank A generally charges a $25 annual fee for its credit card. The senior citizen deposit package is available to all persons who are at least 55 years of age. There are no income requirements, but there is a minimum deposit balance requirement. Are there any fair lending violations in this practice?
A. No. Provided Bank A does not have any income requirements, there is no disparate impact on the community.
B. No. Even though there is an age requirement, provided elderly persons are treated more favorably, there is no violation of law.
C. Yes. Because Bank A has a minimum deposit requirement, there is a disparate impact on low-income consumers.
D. Yes. The age requirement constitutes age discrimination and is not legal under the ECOA.
The initial disclosure requires that certain disclosures relating to the termination of a lease be given to the consumer. Which of these disclosures is NOT required?
A. The conditions under which the lease may be terminated before the end of its term
B. Whether or not the lessee has the option to purchase the property and at what price
C. Whether the lease may be extended at the option of the lessee
D. Whether the lessee will be liable for the difference between the estimated value of the property and its realized value at the termination or end of the lease
Which of the following is acceptable proof of the purchase of flood hazard insurance?
A. Copy of the declarations page of the insurance policy
B. A certificate of insurance
C. Flood insurance binder
D. Letter signed by the borrower agreeing to purchase the insurance
Which of the following accounts is considered to be a new account for delayed funds availability purposes?
A. A new account opened by an established customer who has had several transaction accounts with the bank for a long time
B. A new account opened by a customer who previously had an account but closed it 15 days before opening the new one
C. A new account opened by a customer who has had a regular savings account at the bank for five years
D. A new account opened by a customer who is a joint account holder on another checking account at the bank but who has no other individual account