CFE CFE Consumer Protection & Lending Compliance 2 — Questions and Answers
Question 1: Which federal agency is primarily responsible for enforcing consumer financial protection laws at large banks?
- FDIC
- OCC
- Consumer Financial Protection Bureau (CFPB) (Correct answer)
- Federal Reserve Board
Correct answer: Consumer Financial Protection Bureau (CFPB)
The CFPB, created by the Dodd-Frank Act, has primary supervisory and enforcement authority over consumer financial protection laws at large financial institutions.
Question 2: The Fair Credit Reporting Act (FCRA) gives consumers the right to:
- Demand any credit score they want
- Access a free credit report annually from each major bureau (Correct answer)
- Prohibit all lenders from checking their credit
- Set their own credit terms with lenders
Correct answer: Access a free credit report annually from each major bureau
FCRA entitles consumers to one free credit report per year from each of the three major credit bureaus (Equifax, Experian, TransUnion) through AnnualCreditReport.com.
Question 3: What does 'Regulation E' primarily govern?
- Mortgage lending disclosures
- Electronic fund transfers and consumer debit card transactions (Correct answer)
- Business loan underwriting
- Commercial real estate appraisals
Correct answer: Electronic fund transfers and consumer debit card transactions
Regulation E implements the Electronic Fund Transfer Act and establishes consumer rights and bank obligations related to electronic transfers, ATMs, and debit cards.
Question 4: Under the Home Mortgage Disclosure Act (HMDA), financial institutions must collect and report data primarily to:
- Maximize mortgage loan volume
- Detect and deter discriminatory lending patterns (Correct answer)
- Set uniform interest rates
- Establish minimum down payment requirements
Correct answer: Detect and deter discriminatory lending patterns
HMDA requires institutions to collect and disclose mortgage application data to help regulators and the public identify discriminatory lending patterns and ensure fair lending.
Question 5: Which lending practice involves repeatedly refinancing a loan to generate fees while providing no net benefit to the borrower?
- Amortization
- Loan flipping (predatory churning) (Correct answer)
- Interest rate hedging
- Collateral substitution
Correct answer: Loan flipping (predatory churning)
Loan flipping is a predatory practice where lenders repeatedly refinance loans primarily to collect new fees, stripping equity from the borrower without providing genuine benefit.
Question 6: A financial examiner reviews overdraft fee practices at a bank. Which regulation requires banks to obtain affirmative consent before enrolling customers in overdraft coverage for ATM and one-time debit card transactions?
- Regulation Z
- Regulation E (Opt-in Rule) (Correct answer)
- Regulation B
- Regulation DD
Correct answer: Regulation E (Opt-in Rule)
The Federal Reserve's amendment to Regulation E requires banks to get opt-in consent from consumers before charging fees for overdraft coverage on ATM and debit card transactions.
CFE CFE Consumer Protection & Lending Compliance 2
Which federal agency is primarily responsible for enforcing consumer financial protection laws at large banks?