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

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

Reg B: 12 CFR 1002.2 (c)(2)(v)

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

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.

Reg B: 12 CFR 1002.2(f) and the Official Staff Commentary on this section

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

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 credit and business credit with gross revenues of $1 million or less

A. All types of credit

Reg. B: 12 CFR 1002.4

The prohibition against discrimination in the Equal Credit Opportunity Act and Regulation 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 credit extended to businesses that have $1 million or less in gross revenues.

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 circumstance 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.

Reg. B: 12 CFR 1002.5(c)(2)(iv)

The creditor cannot 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.

Bob Richardson has had 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 applicants 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

D. Mr. Williams and Ms. Smith

Reg. B: 12 CFR 1002.6(b)(2)

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. Williams’ age as it relates to another pertinent element of creditworthiness, namely, the continuation of income throughout the loan term.

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.

Reg. B: 12 CFR 1002.7(d)(2)

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.

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 other 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.

Reg. B: 12 CFR 1002.9(a)(1)(iv)

A creditor muse send an adverse action notice within 90 days after notifying the applicant of a counteroffer if the applicant does not expressly accept or use the credit offered.  However, a creditor that gives the applicant a combined counteroffer and adverse action notice need not send a second adverse action notice if the applicant does not accept the counteroffer.

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 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

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

Reg. B: 12 CFR 1002.9(a)(3)

When notifying business applicants with gross revenues of $1 million or less, the creditor may give a disclosure 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.

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

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

Reg. B: 12 CFR 1002.10(a)(1)

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

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’s email address listed on the application.  Using this procedure, 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

Reg. B: 12 CFR 1002.4(2)

The creditor must obtain the applicant’s affirmative consent before sending disclosures.

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’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.

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.

Reg. B: FDIC Guidance on Spousal Signature Requirements

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 included 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.

Reg. B: 12 CFR 1002.7(d)

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

A. 55

B. 59 ½

C. 62

D. 70 ½

C. 62

Reg. B: 12 CFR 1002.6(o)

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)

B. Gross revenue for the preceding fiscal year

Reg. B: 12 CFR 1002.9(a)(3)

Gross revenue is the measure for whether a notice must be given to a business applicant.

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 record 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.

Reg. B: 12 CFR 1002.12(b)(5)

This shorter record retention is required only for business purpose applicants.