FiCEP - Financial Counseling Certification Program Consumer Protection Laws Questions and Answers 1 — Questions and Answers
Question 1: A client is upset because a third-party debt collector called their workplace, discussed the debt with a coworker, and used profane language. Which consumer protection law most directly addresses these specific actions?
- Truth in Lending Act (TILA)
- Equal Credit Opportunity Act (ECOA)
- Fair Debt Collection Practices Act (FDCPA) (Correct answer)
- Fair Credit Reporting Act (FCRA)
Correct answer: Fair Debt Collection Practices Act (FDCPA)
The Fair Debt Collection Practices Act (FDCPA) explicitly prohibits debt collectors from using abusive, unfair, or deceptive practices. This includes contacting consumers at inconvenient times or places, such as their workplace if they know the employer disapproves, discussing the debt with third parties, and using obscene or profane language.
Question 2: A member applies for a mortgage and is denied. Under the Equal Credit Opportunity Act (ECOA), which of the following reasons for denial is illegal?
- The applicant has a low credit score and insufficient income.
- The applicant's income is primarily from a public assistance program. (Correct answer)
- The applicant has a high debt-to-income ratio.
- The property appraisal was lower than the loan amount requested.
Correct answer: The applicant's income is primarily from a public assistance program.
The Equal Credit Opportunity Act (ECOA) prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or because an applicant receives income from any public assistance program. The other options are legitimate, creditworthiness-related reasons for a lender to deny a loan.
Question 3: To help a client compare the costs of two different car loans, a financial counselor would advise them to look at the disclosure form provided by the lender. Which law mandates that lenders provide this standardized disclosure showing the Annual Percentage Rate (APR) and total finance charge?
- Fair and Accurate Credit Transactions Act (FACTA)
- Truth in Lending Act (TILA) (Correct answer)
- Consumer Financial Protection Act (CFPA)
- Fair Debt Collection Practices Act (FDCPA)
Correct answer: Truth in Lending Act (TILA)
The Truth in Lending Act (TILA), implemented by Regulation Z, requires lenders to disclose credit terms in a standardized way so consumers can easily compare costs. Key disclosures include the Annual Percentage Rate (APR), the finance charge, the amount financed, and the total of payments.
Question 4: A client discovers an account on their credit report that they never opened. Under the Fair Credit Reporting Act (FCRA), what is the most appropriate first step for the client to take?
- Immediately sue the credit reporting agency for damages.
- Pay the balance on the fraudulent account to protect their credit score.
- File a formal dispute with the credit reporting agency that issued the report. (Correct answer)
- Wait for 7 years until the account is automatically removed from the report.
Correct answer: File a formal dispute with the credit reporting agency that issued the report.
The Fair Credit Reporting Act (FCRA) gives consumers the right to dispute inaccurate information on their credit reports. The first step is to file a dispute directly with the credit reporting agency, which is then required to investigate the claim, typically within 30 days.
Question 5: Which of the following entities was established by the Dodd-Frank Act to serve as the primary federal agency for administering and enforcing consumer financial protection laws?
- Federal Trade Commission (FTC)
- Office of the Comptroller of the Currency (OCC)
- Federal Deposit Insurance Corporation (FDIC)
- Consumer Financial Protection Bureau (CFPB) (Correct answer)
Correct answer: Consumer Financial Protection Bureau (CFPB)
The Consumer Financial Protection Bureau (CFPB) was created in 2010 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Its central mission is to make markets for consumer financial products and services work for Americans by making rules more effective, enforcing laws, and empowering consumers to take more control over their economic lives.
Question 6: A debt collector contacts a client about a past-due medical bill. The client is unsure if they actually owe the debt. According to the Fair Debt Collection Practices Act (FDCPA), what right does the client have?
- The right to have the debt automatically forgiven if they claim it's not theirs.
- The right to sue the original creditor immediately.
- The right to request a written validation notice from the debt collector. (Correct answer)
- The right to have the debt collector pay them for emotional distress.
Correct answer: The right to request a written validation notice from the debt collector.
The FDCPA requires a debt collector, either in the initial communication or within five days, to send a written 'validation notice' that states the amount of the debt, the name of the creditor, and a statement that the consumer has 30 days to dispute the debt's validity. If disputed, the collector must provide verification.
FiCEP - Financial Counseling Certification Program Consumer Protection Laws Questions and Answers 1
A client is upset because a third-party debt collector called their workplace, discussed the debt with a coworker, and used profane language.
Which consumer protection law most directly addresses these specific actions?