Reg B: ECOA Flashcards Preview

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Flashcards in Reg B: ECOA Deck (62):
1

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

30 days after receipt

2

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

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

3

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

30 days

4

What is the adverse action timing requirement for a counteroffer?

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

5

What are the notice requirements for withdrawn applications?

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 An application is withdrawn if the applicant expressly withdraws it or if the lender approves the application and expects the applicant to contact the lender about status and the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

6

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

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

7

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

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

8

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

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

9

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

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

10

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

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

11

What is the Notice of Incompleteness timing requirement?

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

12

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

No further obligation.

13

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

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

14

What is the definition of an application?

An oral or written request for credit.

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

15

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

False.

16

When are written applications required?

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

17

When is GMI required?

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

18

What information is collected for GMI?

Ethnicity and race
Sex
Marital status
Age

19

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

Non-mortgage applications.

20

What are the 9 points of prohibited bases?

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

21

When are creditors required to provide appraisals on applications?

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

22

When must a creditor deliver appraisals to an applicant?

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

23

Can an applicant waive the appraisal requirements?

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

24

What are the appraisal waiving requirements?

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

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

25

What are the delivery and timing requirements for "Applicant's Right to Receive Copy of Appraisal?"

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

26

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

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

27

What are the cost/fee limitations for appraisals?

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

28

What are the retention requirements for applications?

25 months

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

29

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

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

30

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

If the application is for individual, unsecured credit.
The creditor may ask: married, unmarried or separated.

31

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

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

32

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

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

33

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

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

34

Which of the following actions are NOT an adverse action?

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

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

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

35

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.

b. Creditors may accept oral applications.

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

36

For what do ECOA and Reg B extend coverage?

a. All types of credit.
b. Only consumer credit.
c. Only consumer credit of $25,000 or less.
d. Only consumer and business credit with gross revenues of $1 million or less.

a. All types of credit.

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

37

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.

c. The applicant resides in a community property state.

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

38

Bob Richardson has three loan applicants this morning:
- Heather Smith, age 17, who needs a car loan for $9,500 for 3 years
- John Bako, age 42, who would like a stock loan for $15,000 for 1 year
- Maynard Williams, age 70, recently retired, who needs a $50,000 home improvement loan for 12 years.

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

a. All of them.
b. None of them.
c. Only Mr. Williams.
d. Mr. Williams and Ms. Smith.

d. Mr. Williams and Ms. Smith.

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

39

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.

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

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

40

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

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

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

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

41

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

a. Give a disclosure of the applicant's right to receive a statement of reasons at the time of the application instead of at the time of adverse action.
b. Mention adverse action notices only if requested by the applicant.
c. Omit the ECOA statement on all notices
d. Provide only the ECOA statement to the applicant.

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

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

42

What may a creditor do when furnishing credit information?

a. May designate accounts in any manner that is convenient and reasonable.
b. Must designated accounts as specified by the parties.
c. Must designate accounts to show participation by both spouses if both are liable.
d. Must designate accounts to show all parties, including guarantors.

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

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

43

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

a. Post the notice on its Web site also
b. Send a paper notice by regular mail also
c. Use a credit scoring system
d. Obtain the applicant's affirmative consent before sending the notice.

d. Obtain the applicant's affirmative consent before sending the notice.

44

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

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

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

45

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.

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

46

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

62

47

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

a. Current net income
b. Gross revenue for the preceding fiscal year
c. Length of time the applicant has been in business
d. Type of business entity (that is, corporation, partnership, or sole prop)

b. Gross revenue for the preceding fiscal year

48

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

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

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

This shorter retention is required only for business purpose applicants.

49

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

On unsecured loans, if the applicant is married and resides in a community property state or property on which the applicant relies is in a community property state, creditor may NOT require the spouse to sign any document unless it is necessary to make the community property available in the even of default if:
1) state law denies the applicant the power to manage or control enough community property to qualify.
2) applicant doesn't have enough separate property to qualify.

50

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

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

51

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

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

52

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

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

53

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

Y

54

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

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

55

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

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

56

What is overt discrimination?

obvious discrimination

57

What is disparate treatment?

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

58

What is disparate impact?

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

59

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

Co-signer means guarantor in Reg B.

60

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

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

61

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

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

62

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

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