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 customer

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

FCRA, Section 603(d) and 15 USC CH 41 1681a

A consumer report does not include a report that only contains information about experiences between the person making the report and the consumer.  Therefore, a bank can provide information about its own lending experience and not be covered by the Fair Credit Reporting Act.

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. William’s bank transactions.  The reports 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. William’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 FCRA.

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 Dept. Store info was part of the bank’s own experience, because it was used by the bank to make a credit decision.

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

FCRA, Section 603(d) and 15 USC CH 41 1681a

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.

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

FCRA, Section 604 and 15 USC CH 41 1681b

There are several permissible uses for the consumer report, including use in credit transactions (extending, reviewing, or collecting loans) and employment purposes.  Providing consumer reports on family members to employees for other purposes without written permission of the person who is the subject of the reports is a violation. 

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

B. Adverse credit items for 7 years and bankruptcies for 10 years

FCRA, Section 605(a) and 15 USC CH 41 1681c

Bankruptcies can be reported for 10 years.  All other adverse items may be reported for 7 years.

First National Bank has denied a credit application from Mr. Johnson because the application scored too low on the bank’s internal credit-scoring system.  Mr. Johnson’s credit report, received from a credit reporting agency, scored a 4 out of a possible 10.  Other parts of Mr. Johnson’s application received low scores also. 

Which statement best describes First National’s responsibility to Mr. Johnson under the FCRA?

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 

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

FCRA, Section 615(a) and 15 USC CH 41 1681m

When credit is denied based wholly or partly on information contained in a consumer report, the user of the report must advise the consumer of that fact and supply the name and address of the credit reporting agency.  Under Regulation B, the adverse action notice must either give the reasons for the action or explain to the applicant that he or she has the right to request the reasons. 

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 first 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 FCRA?

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 FCRA 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.

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

FCRA, Section 615(a) and 15 USC CH 41 1861m

That info on the credit report was partially responsible for the credit denial gives rise to the responsibility to report it to the consumer.  Even too little credit history is enough reason to report under the FCRA.  In addition, under ECOA’s Regulation B, the reasons for credit denial must be provided either automatically or on request after notice of that right is provided.

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.  That bank discovered that Mr. Nelson is four months pat due on the loan.  Based on this info, the bank denied the home equity credit application to Mr. Nelson.  Which statement is correct?

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

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

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

12 CFR 41.30(d)(1); 12 CFR 1022.30(d)(1)

Using medical info in a manner that is no less favorable that it uses other forms of credit info is an exception to the general rule.

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

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

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

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.

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

15 USC CH 41 1681a

This info must be given to the consumer in order to prevent the bank from becoming a consumer reporting agency.

A compliance officer is monitoring a financial institution’s credit reports for compliance with the FCRA 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 indv where the indv authorized the bank to investigate his credit history

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

15 USC CH 41 1681b and 604

The bank cannot obtain a consumer report w/o a legitimate credit or employment purpose.  The consumer must either apply for credit or employment, or the bank must be planning to make a firm offer of credit in order to obtain a consumer report.

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 identify theft

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

12 CFR 41.90(c); 12 CFR 222.90(c); 12 CFR 334.90(c); 12 CFR 571.90(c)

The first step in developing an identity theft prevention program is to perform a risk assessment to determine whether the bank offers or maintains covered accounts, consider the methods used to open and provide access to accounts in order to assess the bank’s exposure to identity theft threats. 

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 info from FSB Insurance to identify which of the bank’s loan customers would be eligible for FSB Insurance’s products.  The bank sends the qualified customers an FSB Insurance brochure.

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

C. FSB insurance receives individualized credit score info 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 info about its own loan products. 

C. FSB insurance receives individualized credit score info 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.

12 CFR 1022.21

The affiliate marketing rules allow the bank to obtain selection info from an affiliate to send marketing materials to it its own customers who might be eligible for the products sold by the affiliate w/o requiring a notice and opt out by the bank’s own customers.  The bank can send info to individuals whose names are obtained on public lists w/o giving an opt-out notice, even if some of them happen to be customers of their affiliates.  The bank can also market its own products w/o requiring an opt-out opportunity.  However, when an affiliate, such as FSB Insurance, obtains individualized info on the bank’s customers and selects them to receive marketing materials, then the opt-out notice requirement is triggered.

In which of the following cases must a furnisher of consumer info 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 SSN

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

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

12 CFR 1022.43 (f)

A furnisher can consider a dispute to be a frivolous dispute if it does not include sufficient identifying info, such as an SSN, it is submitted by a credit repair company or on a form by a credit repair company.  Disputes that have been submitted previously can be considered to be frivolous if the furnisher investigated the dispute when it was previously submitted.

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

D. The comparative file method

12 CFR 1022.72

The direct comparison method is used when the lender directly compares borrowers to other similar borrowers in the portfolio to determine who receives a notice.  The credit score proxy method is used when a lender derives a cutoff credit score where at least 40% of its borrowers fall above the cutoff and 60% below the cutoff.  Borrowers below the cutoff receive notices.  The tiered pricing method allocates notices to borrowers in the higher pricing tiers.