CRCM Fair Lending and Equal Credit Opportunity 1 — Questions and Answers
Question 1: The Equal Credit Opportunity Act (ECOA) prohibits discrimination in credit transactions based on which of the following?
- Credit score below 600
- Race, color, religion, national origin, sex, marital status, or age (Correct answer)
- Employment less than two years
- Loan amount below $1,000
Correct answer: Race, color, religion, national origin, sex, marital status, or age
ECOA prohibits credit discrimination based on race, color, religion, national origin, sex, marital status, age, and receipt of public assistance.
Question 2: Under ECOA, how many days does a creditor have to notify an applicant of action taken on a completed credit application?
- 15 days
- 30 days (Correct answer)
- 45 days
- 60 days
Correct answer: 30 days
Creditors must notify applicants of credit decisions within 30 days of receiving a completed application.
Question 3: What is 'redlining' in fair lending?
- Charging higher interest rates to low-income borrowers
- Refusing to lend or imposing unfavorable terms in minority neighborhoods (Correct answer)
- Requiring cosigners based on the applicant's age
- Offering credit only through preferred brokers
Correct answer: Refusing to lend or imposing unfavorable terms in minority neighborhoods
Redlining is the illegal practice of denying credit or imposing worse terms based on the racial or ethnic composition of a neighborhood.
Question 4: Which federal law specifically prohibits discrimination in residential mortgage lending based on race or national origin?
- Truth in Lending Act
- Fair Housing Act (Correct answer)
- Gramm-Leach-Bliley Act
- Community Reinvestment Act
Correct answer: Fair Housing Act
The Fair Housing Act prohibits discrimination in residential real estate transactions, including mortgage lending, based on protected characteristics.
Question 5: 'Disparate impact' in fair lending refers to:
- A lender who openly states discriminatory policies
- A neutral lending policy that disproportionately harms a protected class (Correct answer)
- A borrower who disputes a loan denial
- Charging different rates to different bank branches
Correct answer: A neutral lending policy that disproportionately harms a protected class
Disparate impact occurs when a facially neutral policy has a disproportionate adverse effect on a protected class without business justification.
Question 6: Under ECOA, an adverse action notice must include:
- The borrower's credit score only
- The specific reasons for denial or a statement that reasons are available upon request (Correct answer)
- Only the creditor's contact information
- The amount the borrower was approved for instead
Correct answer: The specific reasons for denial or a statement that reasons are available upon request
Adverse action notices must state specific reasons for the adverse action or inform the applicant they may request the reasons within 60 days.
CRCM Fair Lending and Equal Credit Opportunity 1
The Equal Credit Opportunity Act (ECOA) prohibits discrimination in credit transactions based on which of the following?