Banking Banking Regulations and Ethics Questions and Answers

Question 1

A loan officer is reviewing an application from their cousin for a significant personal loan.
The loan meets all standard underwriting criteria.
What is the most ethical action for the loan officer to take?

Accepted Answer

Disclose the conflict of interest to their manager and ask for the loan to be reassigned to another officer.

Answer

Approve the loan but add a note to the file about the relationship.

Answer

Decline the loan to avoid any appearance of impropriety.

Answer

Increase the interest rate slightly to compensate for the perceived risk.

Question 2

Which of the following scenarios best describes the primary goal of the Community Reinvestment Act (CRA)?

Accepted Answer

A bank actively markets home mortgage and small business loans in low- and moderate-income neighborhoods within its service area.

Answer

A bank is required to offer the lowest possible interest rates to all customers within its designated assessment area.

Answer

A bank must donate a specific percentage of its annual profits to local charities and non-profit organizations.

Answer

A bank is prohibited from opening new branches in high-income areas.

Question 3

A customer reports an unauthorized electronic fund transfer on their account statement. Under Regulation E, what is the general timeframe a financial institution has to investigate the claim after receiving the notice of error?

Accepted Answer

10 business days

Answer

5 business days

Answer

30 calendar days

Answer

60 calendar days

Question 4

A credit applicant indicates that a significant portion of her stable income is from a public assistance program. According to the Equal Credit Opportunity Act (ECOA), how must a lender treat this income?

Accepted Answer

It must be considered in the same way as income from any other source.

Answer

It can be discounted by 25% compared to employment income.

Answer

It can be used as the sole reason for denying the credit application.

Answer

It can only be considered if the applicant also has full-time employment.

Question 5

Which of the following is the best example of an 'abusive' practice under the Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) framework?

Accepted Answer

A mortgage lender offering a complex, high-risk loan product to a consumer with a limited understanding of finance, knowing the consumer cannot protect their own interests in the transaction.

Answer

An advertisement for a 'free' checking account that clearly discloses the minimum balance required to avoid a monthly fee.

Answer

A bank sending promotional emails to customers who have not opted out of marketing communications.

Answer

A credit card issuer charging a late fee to a customer who missed their payment due date, as specified in the cardholder agreement.

Question 6

A customer deposits a $15,000 personal check from an out-of-state bank into their account. Under Regulation CC's large-deposit exception, what is the maximum amount of the deposit the bank is permitted to place an extended hold on?

Accepted Answer

$8,275

Answer

The entire $15,000.

Answer

$9,475

Answer

$15,000, but only if the customer's account is less than 30 days old.

A loan officer is reviewing an application from their cousin for a significant personal loan.The loan meets all standard underwriting criteria.What is the most ethical action for the loan officer to take?

A loan officer is reviewing an application from their cousin for a significant personal loan.
The loan meets all standard underwriting criteria.
What is the most ethical action for the loan officer to take?