CFE CFE Consumer Protection & Lending Compliance

Question 1

Which federal law requires lenders to disclose the Annual Percentage Rate (APR) and total finance charges to borrowers?

Accepted Answer

Truth in Lending Act (TILA)

Answer

The Truth in Lending Act (TILA) mandates that lenders clearly disclose the APR, finance charges, and loan terms so consumers can make informed borrowing decisions.

Question 2

Under the Equal Credit Opportunity Act (ECOA), a lender may NOT deny credit based on which factor?

Accepted Answer

National origin

Answer

ECOA prohibits credit discrimination based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance.

Question 3

A financial examiner finds that a bank charges higher interest rates to borrowers in minority neighborhoods despite similar credit profiles. This is an example of:

Accepted Answer

Predatory lending and redlining

Answer

Charging higher rates based on neighborhood demographics rather than individual creditworthiness constitutes predatory lending and redlining, both illegal under fair lending laws.

Question 4

What is the primary purpose of the Community Reinvestment Act (CRA)?

Accepted Answer

To encourage banks to meet the credit needs of all communities they serve, including low-income areas

Answer

The CRA requires federal financial regulatory agencies to assess how well banks fulfill their obligations to serve all segments of their communities, especially low-income areas.

Question 5

Which regulation implements the Real Estate Settlement Procedures Act (RESPA) and requires lenders to provide a Loan Estimate to mortgage applicants?

Accepted Answer

Regulation X

Answer

Regulation X implements RESPA and, alongside TILA's Regulation Z, governs the Loan Estimate and Closing Disclosure that mortgage lenders must provide to borrowers.

(CFE) Certified Financial Examiner Practice Test

(CFE) Certified Financial Examiner Practice Test

CFE CFE Consumer Protection & Lending Compliance