CRCM 2019

State National Bank is making a loan to the ACME Corporation to be secured by ACME's manufacturing plant. The bank's loan is for $250,000. The appraised value of the plant is $750,000. The maximum amount of flood insurance available for a commercial building is $500,000. What is the least amount of flood insurance the bank must require under the Flood Regulations? A. $250,000 B. $750,000 C. $500,000 D. None of the above

The correct answer is a. 12 CFR 208.25(c) and (g), 12 CFR 22.3 and 22.7, 12 CFR 339.3 and 339.7, and 12 CFR 172.3 and 172.7 Outline II E(2)

When it returns a check to the Federal Reserve, for which of the following may a returning bank NOT warrant? A. The presenting bank's endorsement B. The check is being returned within the time deadlines C. The bank is authorized to return the check D. The check has not been altered

The correct answer is a. 12 CFR 210.12 Outline II J(4)

What is the primary operational risk factor in the RDC delivery channel? A. Fraud B. Regulatory C. Information Security D. Vendor Management

The correct answer is a. Outline I (C)(2) Ineffective controls at a customer's location may lead to intentional alteration of deposit item information, resubmission of an electronic file, re-deposit of physical items, the ability to alter logical and physical information without detection, money laundering, and the sharing on non-public personal information.

First National Bank would like to automatically increase the credit card interest rate for customers who pay late three or more times in six months on their credit card or on any other loan, including on loans with other creditors. What must the bank do to be in compliance with the Credit Card Practices guidance? A. Explain in promotional rate materials, the application, and the agreement the specific reasons the rate might increase automatically B. Notify all customers in advance when the rate increases C. Allow customers 90 days to close their accounts and pay the balance at the original rate, when the bank increases the interest rate due to late payments D. Not raise the interest rate based on customers' delinquencies on loans to other creditors

The correct answer is a. Outline I B(3)(c) If the rate will increase automatically, banks should explain the reasons that the rate may increase in the promotional materials, application, and agreement. If the bank does not disclose the reasons in these places, the bank still may increase the rate, (for example, because the customer's credit score dropped), but the bank must provide advance notice before the increase and include the reasons for the increase. Note that, depending on state law, the customer may have the right to close the account and pay off the balance at the original rate.

Which of the following countries are currently subject to the Office of Foreign Assets Control Regulations? A. North Korea B. Jordan C. Bahrain D. Russia

The correct answer is a. Outline II North Korea is covered under OFAC regulations, pursuant to the Trading with the Enemy Act, the Anti-Terrorism Act, and the Effective Death Penalty Act.

Which of the following is not true of the FDIC guidance on Overdraft Payment Programs and Consumer Protection? A. Institutions are expected to offer consumers alternatives to automated overdraft protection programs at the time they join the program B. Ad hoc overdraft programs are not covered by the guidance C. Institutions are expected to institute daily limits on the amount of fees that can be charged under the automated program D. Review check clearing procedures for fairness which of the following is not true of the FDIC guidance on Overdraft Payment Programs and Consumer Protection?

The correct answer is a. Outline II (f), (g) FDIC FIL-47-2010 The guidance requires the institution to offer alternatives when the customer uses the overdraft protection at least six times within a rolling 12-month time period

What are holders of unclaimed property required to do? A. Mail a notification to customers whose accounts may escheat to the state B. Charge customers ''inactive/unclaimed'' fees for accounts that are dormant C. Publish in a local paper the owners' names of accounts that will escheat D. Discontinue paying interest on dormant accounts

The correct answer is a. Outline II B(1)

Which of the following provisions is MOST likely to raise fair lending questions if found to be in a written loan policy? A. Minimum income requirement B. Maximum debt-to-income ratio C. Policy against lending out of market area D. Half-point loan discount for automatic payment plans

The correct answer is a. Outline II C(1) The minimum income requirement is more likely to disparately impact lower income applicants that are more likely to be in protected classes.

Which of the following is a "loan originator"? A. The office manager of a manufactured home retail center who does not accept applications from customers? B. A bank teller who distributes preprinted home loan rate sheets to customers who inquire Correct C. A customer service representative who assists applicants that complete an application and collect application data, but does not have loan authority D. A real estate broker who refers prospective purchasers to a mortgage company

The correct answer is c. 12 CFR 1026.36(a) and (d) Outline VII E(2)

In determining a prepaid finance charge for a final APR calculation, a compliance officer notes an unusual settlement agent fee. What should the compliance officer FIRST determine? A. Whether the fee will be prepaid B. Whether the fee is a service, transaction, or activity fee C. Whether the fee is charged in a comparable cash transaction D. Whether the loan will be secured by a dwelling or a residential mortgage transaction

The correct answer is c. 12 CFR 1026.4 (a) Outline IV A(4)(b)(ii) Fees that are charged to customers who pay cash cannot be considered a finance charge.

For which disclosure must a bank obtain a customer's affirmative consent before delivery? A. A hard copy of a right-to-cancel notice B. An electronic credit card application disclosure C. An electronic disclosure statement on a car loan D. An electronic home equity early disclosure

The correct answer is c. 12 CFR 1026.5(a)(1) and 1026.17(a)(1) Outline IV (A)(3)(c) and VIII (B)(2) Consent does not need to be received for certain early disclosures or for advertisements. It also does not need to be obtained for hard copies—only for electronic disclosures.

Is the renewal of a loan considered to be a new extension of credit for purposes of valuing the collateral under Regulation U? A. Yes B. Yes, if any additional amounts are added to the loan balance C. Yes, if any amounts other than interest, service charges, or taxes are added to the loan balance D. No, a renewal is never considered to be a new credit

The correct answer is c. 12 CFR 227.3(h) Outline II H Renewals or extensions are not considered to be new credit unless the amount of the credit is increased by funds other than interest, service charges, or taxes.

ABC National Bank, an independent, limited-purpose bank with $120 million in total assets located in a large urban area, is in the process of determining its option for its CRA evaluation. Unless the bank chooses otherwise, under which test will it be evaluated for CRA performance? A. The intermediate small bank performance standards B. The lending, investment, and service tests C. The community development test D. The lending test

The correct answer is c. 12 CFR 228.25; 12 CFR 345.25; 12 CFR 25.25; 12 CFR 195.25 Outline III C This option is available only for wholesale and limited-purpose banks. ABC Bank can choose any other option.

Which of the following criteria accurately describes a small business loan for which a large bank must annually report data? A. A loan to a business that employs fewer than 50 people B. A line of credit to a business with assets of less than $5 million C. A loan to a business in an amount of $1 million or less D. A loan to a business that does not generally have access to regional or national credit markets

The correct answer is c. 12 CFR 228.42; 12 CFR 345.42; 12 CFR 25.42; 12 CFR 195.42 Outline II B(1)(c)(i) CRA requires large institutions to report data on small business loans. The reporting requirement is limited to business loans of $1 million or less.

When is a bank NOT required to comply with the Fair Debt Collection Practices Act? A. When it uses a name other than its own in the collection of its debts B. When it uses the U.S. mail to contact defaulted loan customers of its correspondent banks C. When it uses its own name to collect its debts and those of affiliated institutions D. When it collects debts regularly for other institutions under a reciprocity agreement

The correct answer is c. 15 USC 1692a Outline I B(1) and (2)

To what amount must a bank limit interest on debts under SCRA unless otherwise determined by a court? A. A rate, specified by military counsel, based on the servicemember's financial condition at the time of call to active duty B. The Wall Street Journal's Prime Rate in effect at the time of the servicemember's call to active duty C. Six percent for all accounts made prior to the servicemember's call to active duty D. The amount needed to fully amortize the debt while the servicemember is on active duty

The correct answer is c. 50 USC Appendix 527 Outline I B(1)

Mr. Hilliard applied to First National Bank for a car loan. The bank requested a credit report on Mr. Hilliard from the local credit reporting agency and found that he had almost no credit. No negative items were on the report. In addition, Mr. Hilliard had been employed at his job for four months and his previous work experience was difficult to verify. The bank denied his application for a loan and sent him an adverse action notice. What should the bank do under the Fair Credit Reporting Act? A. Notify Mr. Hilliard that a credit report was obtained and give him the name and address of the credit bureau. B. Nothing. The bank has no responsibilities under the Fair Credit Reporting Act because the credit report contained no adverse items. C. In person or over the telephone, explain to Mr. Hilliard that, although the credit report had no negative items, he has too little credit history. D. Give Mr. Hilliard a copy of the credit report.

The correct answer is c. Fair Credit Reporting Act, Section 603(d) and 15 USC CH 41 1681a Outline I A and B

Which of the following is required to be reported on ABC Bank's HMDA LAR? A. An application from Mr. Welch for a preapproval of a home purchase loan application that is approved by ABC in writing but not accepted by Mr. Welch B. An application from Mr. and Mrs. Rawlings for a preapproval of a home purchase loan application that is denied by ABC C. An application from Ms. Connor for a home equity loan to be used to consolidate credit cards D. All of the above

Correct. The correct answer is d. 12 CFR 1003.4(a)(3) and (5) Outline II(A) Applications for a home purchase loan, a home improvement loan, a refinancing, a cash-out refinancing are reportable Applications for a consumer purpose other than home purchase, home improvement or refinancing is also reportable.

When may a bank pay an overdraft of $5,000 created by an executive officer of the bank? A. When the officer is at the level of a vice president or lower. B. When the officer has previously signed an overdraft protection credit agreement in an amount sufficient to cover the overdraft. C. When the officer has enough funds in another account to cover the overdraft. D. When the bank pays the overdrafts for other good customers in the ordinary course of business.

Outline II A(9) Overdrafts may be paid only pursuant to a written credit agreement to extend funds or a written agreement to transfer money. The prohibition against payment of overdrafts applies to executive officers and directors (not principal shareholders, nor to the related interest of any insider).

Acme Mortgage is selling its mortgage servicing portfolio to First National Bank. In the context of transferring the servicing of the mortgages, which of the following activities is required of Acme? A. Acme must notify the borrowers of the transfer 15 days before the effective date of the transfer. B. Acme must notify the borrowers of the transfer 30 days before the effective date of the transfer. C. Acme and First National Bank can provide a combined notice 30 days before the effective date of the transfer. D. Acme must notify the borrower 15 days after the effective date of the transfer.

The correct answer is a. 12 CFR 1024.33(b)(3)(i) Outline II E(3)(b)(ii)(b)

For what do ECOA and Regulation B extend coverage? Correct A. All types of credit B. Only consumer credit C. Only consumer credit of $25,000 or less D. Only consumer and business credit with gross revenues of $1 million or less

The correct answer is a. 12 CFR 1002.4 Outline I A The prohibition against discrimination in the Equal Credit Opportunity Act and Regulation B applies to all types of credit regardless of the borrower, amount, or purpose. Certain adverse action notification requirements apply only to credit to consumers for personal, family, and household purposes and to credit extended to businesses that have $1 million or less in gross revenues

What may a creditor do in response to an application for credit from a business with gross revenues of $1 million or less? A. Give a disclosure of the applicant's right to receive a statement of reasons at the time of the application instead of at the time of the adverse action B. Mention adverse action notices only if requested by the applicant C. Omit the ECOA statement on all notices D. Provide only the ECOA statement to the applicant

The correct answer is a. 12 CFR 1002.9(a)(3) Outline II F(2)(g)(i)(b) When notifying business applicants with gross revenues of $1 million or less, the creditor may give a disclosure at the time of application or at the time of adverse action. The statement may be oral or in writing, and the ECOA notice does not have to be given if the application is made by telephone and the notice of adverse action is oral

What information must be on the 2018 HMDA LAR for home loans on property located within the bank's metropolitan area? A. The state, county, census tract, and metropolitan area of the property B. The address, census tract, and metropolitan area of the property C. The county, address, and fair market value of the property D. The name, address, and metropolitan area of the applicant

The correct answer is a. 12 CFR 1003.4(a)(9) Outline III(B)(12)

Mrs. Walters uses her ATM card each week to withdraw cash. To remember her access code, she writes it on the card in permanent ink. On March 1, her card is stolen. On March 2, $500 is taken from her account. On March 3, she notices the card is missing and notifies the bank the same day. Later on March 3, another $100 is taken from her account. For how much of the loss is Mrs. Walters liable? A. $50 B. $600, because she was negligent in writing her access code on the card C. $100 D. $500, because she was negligent in writing her access code on the card

The correct answer is a. 12 CFR 1005.6(b) Outline II B(2) Mrs. Walters notified the bank within the time periods prescribed in Regulation E; therefore, she can be held liable only for $50. Her negligence is irrelevant under Regulation E and the Electronic Fund Transfer Act.

Marion Evanss bank debit card is stolen on March 1, a Tuesday. On March 2, $100 is taken from her account with the card. She notices that her card is missing from her purse on March 3 and begins a search for the card. On March 6, another $100 is taken from her account. On March 8, $500 is taken from her account. On March 10, she notifies the bank. For how much of the amount taken can Marion be held liable? A. $500 B. $600 C. $100 D. $50

The correct answer is a. 12 CFR 1005.6(b)(2) Outline II B(2) Marion may be responsible for up to $50 of any loss for the first two business days if she notifies the bank within two business days of the discovery of the loss. If not, she is responsible for unauthorized transactions that would not have occurred if she had notified the bank within two days of her notice of the loss up to a maximum of $50 in the first two days and, for those made afterward, up to a total of $500. She learned of the loss of her card on March 3. However, to limit her liability to $50, she would have to have notified the bank by midnight of March 5. She did not notify the bank until March 10. Therefore, she is potentially liable for $100 of the funds taken on March 6 (after the two-day period to limit liability to $50) and the time she notifies the bank (March 10) up to $500. Of the $600, she is liable for $500.

Which of the following is a NOT a responsibility of a regulated financial institution under the SAFE Act? A. Hire mortgage loan originators as employees B. Ensure that mortgage loan originators that are employees register with the Registry C. Adopt policies and procedures for compliance with the SAFE Act D. Submit required information on the bank to the Registry

The correct answer is a. 12 CFR 1007.103(a) and 1007.104 Outline II A(1) and (4) , II D

What insurance disclosures are required in the lease disclosure statement? A. The types and amounts of coverage provided by the lessor and the cost to the lessee B. The types, amounts, and estimated costs of recommended coverage even if not provided or paid by the lessor C. The cost to the lessee D. No insurance disclosures are required

The correct answer is a. 12 CFR 1013.4(o) Outline II A(4)(k) If provided by the lessor, the disclosure must include the types, amounts, and cost to the lessee. If not provided by the lessor, the type and amount must be disclosed.

Which of the following is the lender's responsibility if a lender does NOT conduct the settlement of a RESPA transaction? A. The lender must obtain a copy of both the buyer's and seller's Closing Disclosures which incorporate the HUD-1 settlement statement and keep them for five years after the settlement date. B. The lender need not obtain or keep any HUD-1 Settlement Statements. Incorrect C. The lender must obtain a copy of the buyer's HUD-1 Settlement Statement and keep it for two years after the settlement date. D. The lender must prepare the HUD-1 Settlement Statement and send it to the person conducting the settlement.

The correct answer is a. 12 CFR 1024.10(e) Outline II G

In the small bank performance standards, which of the following is NOT a criterion? A. The bank's CRA strategic plan B. The bank's loan-to-deposit ratio C. The geographic distribution of loans D. The percentage of loans within the bank's assessment area(s)

The correct answer is a. 12 CFR 228.26; 12 CFR 345.26; 12 CFR 25.26; 12 CFR 195.26 Outline III D(2) Under the small bank performance standards, the bank is not required to have a CRA strategic plan.

Which statement is true regarding a consumer's right to rescind an open-end credit transaction? A. Right of rescission applies only to transactions secured by the consumer's principal dwelling. B. Right of rescission applies separately to each advance of funds made under a home equity plan. C. Right of rescission can be made orally or in writing. D. Notice of right of rescission is made only to the primary borrower.

The correct answer is a. 12 CFR 1026.15(a)(1), 1026.15(a)(2), 1026.15(a)(3), and 1026.15(b) Outline VIII G The right to rescind a transaction is required only in a transaction secured by a consumer's principal dwelling. Once a notice of the right to rescind is given and the rescission period passes, no additional rights to rescind are granted to the consumer in a home equity plan provided the advances are made in accordance with the plan's provisions. The exercise of the right to rescind must be in writing to be effective. A consumer cannot rescind orally by telephone. Two notices of the right to rescind must be given to each consumer with an ownership interest in the property securing the account.

If an advertisement for a lender's mortgage loan product states that "we offer 15 and 30-year loans," what additional disclosures are required by Regulation Z? A. The terms of repayment, amount of the down payment (in a credit sale), and the APR B. The APR and an example based on a $10,000 purchase price C. The monthly payment amount based on a $10,000 purchase price and a maturity recently offered by the bank D. No additional disclosures are required

The correct answer is a. 12 CFR 1026.24(d)(1) and (2) Outline IV F(6) If any triggering terms are used (including the amount or percentage of the down payment), then the APR and terms of repayment and the amount or percentage of the down payment must also be disclosed.

In which of the following transactions is a disclosure statement to the consumer required? A. A $125,000 loan to purchase and secured by an unimproved lot on which the borrower eventually plans to build a home for retirement Incorrect B. A $100,000 loan made to a physician for a recreational vehicle, secured by the physician's business equipment C. A $75,000 loan to purchase a speedboat D. A $200,000 unsecured loan to purchase a residence

The correct answer is a. 12 CFR 1026.3(b) Outline III B This loan is covered by Regulation Z because it is for a consumer purpose and is secured by real estate. If it were not secured by real estate, it would not be covered. The other alternatives are either not real estate secured or are too large for Truth in Lending coverage.

Which of the following actions is acceptable under the financial reporting regulations? A. Attaching a narrative explanation by management of the reasons for a cease and desist order as a part of the annual disclosure B. Attaching a copy of the bank's last safety and soundness examination to the annual disclosure C. Including a statement that indicates that the bank's regulatory agency has reviewed the financial information D. Using an unaudited financial statement for the past two years as an annual disclosure statement

The correct answer is a. 12 CFR 18, and 12 CFR 350 Outline II D Bank management may include additional information with the annual disclosure of financial information, such as the existence of and underlying reasons for an enforcement action like a cease and desist order. The regulations specifically prohibit the other actions.

If a bank receives a request for financial disclosure, how may the bank fulfill this request? A. Provide copies of the call reports covering the current and previous year B. Provide a copy of its statement of condition covering the year immediately preceding the request C. Provide a copy of its most recent, unaudited financial statement D. Provide copies of its Uniform Bank Performance Reports for three consecutive years

The correct answer is a. 12 CFR 18.4 and 18.5, and 12 CFR 350.4 and 350.5 Outline II C and D The bank may provide a copy of its call report or just the relevant sections as required by the regulation. The other methods described do not fulfill the requirements of providing an alternative disclosure statement.

Which of the following types of transactions should NOT be counted when monitoring the Regulation D transaction limits on money market deposit accounts? A. ATM transactions B. ACH utility payments C. Debit card purchases D. Internet bill paying transfers

The correct answer is a. 12 CFR 204.2(d) Outline II F ATM transactions are specifically excluded from the types of transactions that must be counted against the six transaction limit.

Which of the following account monitoring systems would not achieve compliance with Regulation D's classification of "savings accounts"? A. The bank allows customers to open money market savings accounts and make unlimited withdrawals by check. However, after the sixth check the bank converts the account to a regular checking account for the remainder of the month. At the beginning of the next month, the account reverts to a money market savings account until the customer writes a seventh check on the account. B. The bank allows customers to make only the required number of withdrawals and preauthorized transfers on money market accounts, but the bank has no system for preventing the customer from writing too many checks on the account. The bank reviews its records and warns its customers who make too many withdrawals that the account will convert to a checking account if too many withdrawals occur again. C. The bank offers money market accounts and has a sophisticated computer program that will not allow an improper number of transactions to occur. D. The bank offers money market accounts. If the depositor makes too many transfers, the account converts to a transaction account and does not convert back to a non-transaction account.

The correct answer is a. 12 CFR 204.2(e)(4) Outline II G To maintain the nontransaction account nature of a money market or savings deposit, the bank must do its best to make sure that the limitations on transfers are enforced. The bank cannot help a depositor circumvent the requirements by establishing such an account as in this example. The Federal Reserve Board has stated that if the customer has the ability to make the transfers, then the account cannot be a nontransaction account.

Which of the following phrases, if stamped on a time deposit, is NOT effective to make the deposit nontransferable? A. Not negotiable B. Transferable only on the records of the bank C. Transferable only with the permission of the bank D. Not transferable

The correct answer is a. 12 CFR 204.2(f)(1)(iii) Outline II E(6) The Federal Reserve Board's interpretations state that the words not negotiable and not assignable are not sufficient to make the deposit nontransferable.

Trust Co. and First National Bank are located in the same city and each has assets of over $50 million. The president of First National has been asked to serve as a director of Trust Co. First National has no trust department and no trust operations. Trust Co. operates solely as a trust company. Would this relationship violate the prohibitions against management official interlocks in Regulation L? A. Yes, because the institutions are in the same city. B. No, because the institutions are not both depository institutions. C. No, because the institutions do not compete. D. Maybe, but it depends on the size of the institutions.

The correct answer is a. 12 CFR 212.3(a); 12 CFR 26.3(a), 12 CFR 348.3(a); 12 CFR 196.3 Outline II A(1) The fact that there will be no competition between the institutions is irrelevant.

Which of the following is true regarding extensions of credit to executive officers, directors, and principal shareholders? A. Must be approved in advance by the board of directors if the aggregate credit is more than the greater of either $25,000 or 5 percent of the bank's capital and surplus, not exceeding $500,000 B. Must be approved in advance by the board of directors if the credit is greater than $50,000 or 5 percent of the bank's capital and surplus C. May not exceed $100,000 in the aggregate, regardless of approvals D. May not exceed $250,000 in the aggregate, regardless of approvals

The correct answer is a. 12 CFR 215.4(b) Outline II A(3)

Which of the following loans requires a notice of special flood hazard? • Loan A is to be secured by a car-wash facility located in a special flood hazard area in a community where federal flood insurance is not available • Loan B is to be secured by a rental house not located in a special flood hazard area but in a community where flood insurance is available • Loan C is to be secured by a vacant lot located in a special flood hazard area in a community where federal flood insurance is available A. Loan A B. Loan B C. Loan C D. All the loans

The correct answer is a. 12 CFR 22.9, 12 CFR 339.9, 12 CFR 208.25(i), and 12 CFR 172.9 Outline II B Loan B is not in a special flood hazard area. Loan C is a vacant lot, which is not insurable.

Which of the following items is considered a low-quality asset? A. An asset in a nonaccrual status B. An asset on which interest is past due 15 days C. An asset that will be transferred to the workout area within the next 60 days so that the terms can be renegotiated D. None of the above

The correct answer is a. 12 CFR 223.3(v) Outline I C(2)

First National Bancshares, Inc., a bank holding company, filed an application with its Federal Reserve Bank on March 1 to acquire a subsidiary bank. On March 15 the Federal Reserve Board asked First National for more information. On April 1 the Federal Reserve Bank received the completed application and accepted it. On April 5 the Federal Reserve Bank notified First National of the April 1 acceptance and referred the application to the Federal Reserve Board. Under the normal rules, by what date must the Federal Reserve Board act on the application? A. June 1 B. April 30 C. June 5 D. July 1

The correct answer is a. 12 CFR 225.15(d) Outline IV E(5) The usual time from acceptance is 60 days. However, with additional notification, the Federal Reserve Board can extend the time up to 91 days from the date the Federal Reserve Bank accepted the application.

Value Inc. is a federally regulated AMC and a subsidiary owned and controlled by ABC bank, a federally insured depository institution. Value Inc. is subject to all of the following requirements EXCEPT: A. The company must register with the State appraiser and certifying licensing agency in all states in which it operates B. The company must maintain compliance with valuation independence standards set forth in the Truth in Lending Act C. The company must require that all appraisals comply with USPAP D. The company must verify that only State-certified or State-licensed appraisers are used for federally related transactions

The correct answer is a. 12 CFR 225.193; 12 CFR 323.11; 12 CFR 34.213 Outline III E(2)(b) If an AMC is federally regulated and a subsidiary owned and controlled by an insured depository institution it is not subject to the requirement to register with a State.

For which of the following business activities must a bank holding company obtain prior approval of the Federal Reserve Board? A. Operating an auto club service B. Serving as a safe deposit company C. Operating as a management consulting firm for financial institutions D. Selling installment loan data processing

The correct answer is a. 12 CFR 225.21, 225.22 and 225.28 Outline V A, B, and C

Which of the following is NOT a corporate practice required of bank holding companies? A. Each bank subsidiary must file a notice with the Federal Reserve before offering a new product. B. Each bank subsidiary must conduct its operations in a safe and sound manner. C. Each bank subsidiary must be insured by the FDIC. D. Each bank subsidiary must file a notice with the Federal Reserve before purchasing any of its own securities.

The correct answer is a. 12 CFR 225.4(a), (b), and (c) Outline II A, B, and C

First National Bank has made a loan to Mr. Good, secured by margin stock, to purchase margin stock. He trades stocks frequently, makes substitutions on loan collateral regularly, and sometimes withdraws collateral and does not replace it. Must FNB ensure that margin requirements are met after every substitution and withdrawal? A. Yes. The margin requirements must be met at all times. B. No. If the margin requirements were met when the loan was made, there are no further requirements. C. No. The bank is only required to ensure that withdrawals do not violate margin requirements; collateral substitutions are not covered. D. No. In this case the margin requirement must be met only when the loan is renewed.

The correct answer is a. 12 CFR 227.3(f) Outline II G A bank may permit a customer to make substitutions and withdrawals, but the margin requirements must be met at all times.

QRS State Bank is being examined under the lending test. Which of the following is the most relevant criteria for the lending test? A. The distribution of the bank's small business loans B. The racial and gender characteristics of QRS's lending staff C. The location of QRS's branches D. The services QRS offers to its community

The correct answer is a. 12 CFR 228.22(b)(2); 12 CFR 345.22(b)(2); 12 CFR 25.22(b)(2); 12 CFR 195.22(b)(2) Outline III B(1)(b) The other criteria could be important for other tests, such as fair lending or the community development service test; however, they are not part of the lending test.

A bank has been criticized by an examiner for less than satisfactory CRA performance. The bank must show improvement in its commitment to CRA. For the examiner, what would be LEAST effective in demonstrating the change? A. Informing the examiner that the bank does not plan to acquire or merge with another bank, so CRA is not a priority B. Giving the examiner an updated CRA public file C. Showing the examiner a list of community groups with which the bank has met in the past 24 months to discuss credit needs D. Showing the examiner results of the bank's most recent geocoding analysis, indicating parity in the number of loans made in each census tract

The correct answer is a. 12 CFR 228; 12 CFR 345; 12 CFR 25; 12 CFR 195 Outline II E Outline III B Outline III (B)(b)(ii) A regulatory examiner would not be impressed with a bank's admission that CRA is not a priority.

On which of the following deposits is a bank NOT required to give next day availability? A. A cashier's check deposited at a proprietary ATM B. A Social Security check received through the mail to be deposited in the payee's account C. U.S. Postal Service money orders deposited in person to the payee's account D. Cash, where the deposit was made in person to a teller at the depository bank

The correct answer is a. 12 CFR 229.10(c)(v) Outline II A(3) Cashier's checks must be deposited in person to get next day availability.

A customer deposits a $7,000 local check and a $12,000 U.S. Treasury check in the bank on Monday. The bank's policy is that it generally makes funds from checks available on the next business day, although it does place exception holds. When does the bank have to make these funds available? A. $5,000 is available on Tuesday; the rest is available within a reasonable time period B. $500 is available on Tuesday; $4,500 is available on Wednesday; and the remaining is available within a reasonable time period C. $5,200 is available on Tuesday; $4,800 is available on Wednesday; and the remaining is available within a reasonable time period D. $12,200 is available on Tuesday and $6,800 is available on Wednesday

The correct answer is a. 12 CFR 229.13(b) and 229.10(c) Regulation CC Outline III E(2) The aggregate deposit is subject to the large deposit exception. The next day availability requirement for Treasury checks is not applicable to the entirety of a large deposit. Only $5,000 of the Treasury check must be made available on the next business day. In the case of a large deposit exception, the $200 does not have to be made available, so only $5,000 is required to be made available on the next business day. The remainder of the deposit can be made available within a reasonable period of time.

A senior officer of a bank is considering breaking with tradition and opening the main office for general banking business on Saturdays. Before making the final decision, he requests your input. Which of the following describes the Regulation CC implications of his proposal? A. Saturday is not a ''business day'' under the regulation, and the funds availability schedule will not be affected. B. Funds availability disclosures and lobby notices will have to be revised for all branches. C. An extra day of interest on Saturday deposits will have to be paid. D. Being open on Saturday will shorten hold periods and increase exposure to operating losses.

The correct answer is a. 12 CFR 229.2(g) Outline I B

Bank policies and procedures for check collection must include what procedure to follow when a bank has actual knowledge that checks for restricted transactions have been received from a bank customer: A. Procedures for determining the action to take, including when the account should be closed B. Procedures for determining when all checks on the account must be monitored C. Procedures for circumstances when only certified checks may be accepted D. Procedures for circumstances when no checks on foreign accounts may be accepted

The correct answer is a. 12 CFR 233.6(e) Outline II F (1)(c) If a bank has actual knowledge that restricted transactions have occurred its policies should include procedures for determining what action should be taken. The regulation does not require specific actions a bank must take when this occurs, but does require the bank to establish its own policies and procedures that describe the action it will take in this event.

Which of the following is NOT a permissible activity for a savings and loan holding company? A. Offer tax and accounting services to small businesses b. B. Acquire and develop residential real estate c. C. Underwrite credit life insurance d. D. Manage improved real estate projects

The correct answer is a. 12 CFR 238.52(b) Outline V The holding company can provide tax and accounting services only to its affiliates.

When an organization reorganizes into a federal mutual holding company, it must: A. Give its members the same rights as immediately prior to the organization B. Confer upon its members a share of the savings association for every holding company share C. Agree to buy out minority shareholders that do not approve the reorganization D. Deposit funds into an escrow account to pay off the shares of minority shareholders

The correct answer is a. 12 CFR 239.5 Outline II B(1) The management of the association cannot dilute the rights of its members with reorganization into a mutual holding company. Members have to have the same quality of rights as prior to the merger.

First National Bank is located outside an MSA. It received 120 home loan applications last year. Which statement best describes the bank's Fair Housing recordkeeping requirements? A. It may either keep the Home Loan Data System records, or it may keep the HMDA LAR information. B. It must complete up to 2,000 Home Loan Data Submission Forms per bank or 250 per decision center and submit them to the OCC within 30 days. C. It must keep a HMDA LAR. D. It must keep the Home Loan Data System records.

The correct answer is a. 12 CFR 27.3(a)(2) Outline II D and E(1) If the bank is not covered by HMDA, it may choose to keep a HMDA LAR, or it may keep the Home Loan Data System records, at its option.

Which of the following loans is NOT subject to Fair Housing monitoring requirements for housing-related loans made by a national bank located outside a metropolitan statistical area (MSA)? A. A loan to purchase a mobile home B. A loan to provide permanent financing for the construction of a primary residence C. A loan to purchase a primary residence D. The refinancing of a home purchase loan

The correct answer is a. 12 CFR 27.3(a)(2)) Outline II E(2) Mobile home loans are not covered by the regulation unless real estate on which the home will be placed is included in the financing.

As a general rule, how is the lending limit for a national bank or savings association BEST described? A. 15 percent of capital and surplus for unsecured loans, up to an additional 10 percent of capital and surplus for loans fully secured by marketable collateral, and no limit on loans permitted by exception B. 15 percent of capital and surplus for unsecured loans or 25 percent of capital and surplus for a combination of unsecured loans, loans fully secured by marketable collateral, and loans permitted by exception C. 15 percent of net surplus for unsecured loans, 10 percent of net surplus for loans fully secured by marketable collateral, and no limit on loans permitted by exception D. 25 percent of total capital and surplus for all loans

The correct answer is a. 12 CFR 32.3(a) and 32.2(v) Outline II A

Assuming that the following are interest-bearing accounts at First National Bank and the SMDIA is $250,000: Single Accounts Balances Joint Accounts Balances Jim $300,000 Jim and Fred $180,000 Fred $350,000 Fred and Jim $160,000 Susan and Jim $200,000 How much of Jim's money is covered by deposit insurance? A. $500,000 B. $530,000 C. $570,000 D. $590,000

The correct answer is a. 12 CFR 330.6 and 330.9(b) Outline III A and B Jim's single ownership account is insured separately for the $250,000. His one-half interest in each of the three joint accounts is aggregated and limited to $250,000. Therefore, his joint account balance of $270,000 is insured for $250,000 and $20,000 is uninsured.

Assuming that the following are interest-bearing accounts at First National Bank and the SMDIA is $250,000: Single Accounts Balances Joint Accounts Balances Jim $250,000 Jim and Fred $180,000 Fred $350,000 Fred and Jim $160,000 Susan and Jim $300,000 How much of Fred's money is covered by deposit insurance? A. $420,000 B. $500,000 C. $350,000 D. $340,000

The correct answer is a. 12 CFR 330.6 and 330.9(b) Outline III A and B Under the SMDIA $250,000 limit, Fred's single ownership account is insured to $250,000. The remaining $100,000 is uninsured. His one-half interest in the $180,000 joint account and his one-half interest in the $160,000 joint account are fully insured.

Timothy Edwards inherited some money from his father and decided to put the funds in several accounts at First National Bank. Timothy has an individual savings account with a balance of $1,400,000. He and his wife, Sylvia, have a savings account with a balance of $750,000. They also have a joint NOW account with a balance of $280,000. In addition, they have the following trust accounts for their children, John and Suzanne: Timothy, trustee for John (balance $195,000); Timothy, trustee for Suzanne (balance $195,000); Sylvia, trustee for John (balance $120,000); Sylvia, trustee for Suzanne (balance $120,000). What is the total balance in the accounts of this family that is covered by deposit insurance, assuming a SMDIA of $250,000? A. $1,380,000 B. $1,660,000 C. $1,130,000 D. $1,140,000

The correct answer is a. 12 CFR 330.6, 330.9, and 330.10 Outline III A, B, and C The individual savings account owned by Timothy is covered as a single ownership account. $250,000 of it is insured. The savings account and NOW account are joint ownership account and is separately insured, but only for a total of $250,000 for each owner. The rest is uninsured. The other revocable trust accounts would be insured for the full balances since the beneficiaries are natural persons

First National Bank is a member of a multibank holding company. The bank makes ARM loans and occasionally purchases ARM loans from its affiliate national and state banks as well as from nonaffiliate banks. All of its own ARMs and well as those it purchases are subject to Regulation Z. Which of the following practices is NOT acceptable under the OCC ARM regulation? A. The bank purchases loans from its state affiliate banks where the index on the loan is tied to First National's prime rate. B. The bank makes loans to purchase single-family dwellings with interest rates that may be adjusted from time to time. C. The bank links the interest rate indices on its own ARM loans to the national prime rate as published in The Wall Street Journal. D. The bank requires its national bank affiliates to use the national prime rate as published in The Wall Street Journal as the index for any of the ARM loans it purchases.

The correct answer is a. 12 CFR 34.21 Outline II B and C The OCC ARM regulation requires that any index used on an ARM loan not be linked to a rate within the control of the bank. The regulation also requires that loans purchased by a national bank from an affiliate or a subsidiary comply with the ARM regulation.

First State Bank, a state nonmember institution, plans to purchase a company that would be a financial subsidiary of the bank. First State will send a notice to the FDIC of its proposed acquisition. Of the following factors, which one would NOT be relevant to the FDIC's consideration of the bank's acquisition? A. First State Bank's asset size B. Whether First State Bank is well capitalized C. First State Bank's CRA rating D. The impact of the acquisition on First State Bank's safety and soundness

The correct answer is a. 12 CFR 362.18 Outline VII The effect of the acquisition on the bank's safety and soundness, the bank's CRA rating, and whether it is well capitalized are all required regulatory considerations.

ACME National Bank has a Web site that lists the bank's products and services. On its consumer loan page it lists debt cancellation contracts as an available product. What other disclosure must the bank place on this Web page? A. None. Because it only lists the product, nothing else is required. B. The short-form disclosures must be on the page. C. The short-form disclosures must be available by a conspicuous link on the page. D. The long-form disclosures must be on the page.

The correct answer is a. 12 CFR 37.6(e) Outline II D(4)

Second National has decided to close one of its less profitable neighborhood branches. Which of the following actions is NOT required of the bank under federal law? A. Publish a notice of the closing in the local newspaper B. Send a notice to its regulatory agency C. Send notices to the branch customers D. Post a notice at the branch

The correct answer is a. 12 USC 1831(r-1) (b) Outline II A, B, C, and D Publishing a notice in the newspaper is not required by either the statute or the policy guidelines

A bank has a stand-alone ATM in a high crime area. Due to concerns for the safety of individuals using the ATM, management decides to close it. According to branch closing policy statements issued by federal regulators, which of the following actions should the bank take? A. No action is required because an ATM is not, by definition, a branch. B. Post a notice at the ATM at least 30 days before the intended closing date. C. Notify the bank's federal regulatory agency at least 90 days before the intended closing date. D. Mail a notice to all customers at least 90 days before the intended closing date.

The correct answer is a. 12 USC 1831(r-1)(e)(1) Outline I B(1) ATMs are not considered branches for purposes of this law.

An officer at First National Bank has reason to believe that one of the bank's customers may be involved in illegal activities for which funds are regularly deposited into the customer's account. The officer does not know whether to notify the proper government agency or to notify the customer first. Under the Right to Financial Privacy Act what can the bank do? A. The bank must notify the proper government agency, state that the bank has information concerning a possible violation of law and give the government the name and account number of the person involved. B. The bank must notify the government agency that a possible crime has been committed and supply the customer's name, but it also must notify the customer at the same time. C. The bank cannot notify the government agency until it notifies the customer and gives the customer a reasonable period of time to explain the account activity. D. The bank must notify the government agency and supply all records that support its claim that a law was violated.

The correct answer is a. 12 USC 3403(c) Outline II B(4) If the bank believes a crime may have been committed, it must notify the government agency and give only the customer's name and account number and the nature of the suspected activity. It should not notify the customer. The Right to Financial Privacy Act permits such a disclosure, and the suspicious activity reporting (SAR) regulations require it. Under the SAR regulations the customer may not be notified.

First National Bank requires all its professional and executive customers when opening an account to sign a statement authorizing the release of financial information to government agencies on request. Is this type of authorization effective for purposes of the act? A. No, such a statement cannot be required as a condition of doing business B. Yes, with proper disclosures to the customer C. Yes, if the bank requires the customer to sign a new authorization statement every three months D. Yes, if the customer is notified within 30 days of each release of records to a government agency

The correct answer is a. 12 USC 3404(b) Outline II A(1)(g) The law does not allow the bank to require a customer to sign an authorization as a requirement of doing business.

In cases of a judicial subpoena, administrative subpoena, and formal written request, how long after mailing the customer notice must the government agency wait before proceeding to obtain the records? A. 14 days B. 20 days C. 30 days D. 15 days

The correct answer is a. 12 USC 3405(3), 3407(3), and 3408(4)(B) Outline II A(2), (4), and (5)

First National Bank's mortgage department generally requires the purchase of PMI when the borrower is making less than a 20 percent down payment. Which of the following disclosures is NOT required in connection with PMI? A. A Good Faith Estimate B. An initial PMI disclosure C. An annual disclosure of the borrower's PMI rights D. A notice when the mortgage reaches its halfway point

The correct answer is a. 12 USC 4903 Outline II G Although a Good Faith Estimate is probably required on most of the mortgages First National makes, it is not given in connection with required PMI.

Juanita Brown has her home loan at ACME Bank. Her payment was due on December 1. It is now January 7. Must ACME send her a homeownership counseling notice? A. Yes, all eligible borrowers must receive a notice before the loan is delinquent for 45 days unless a payment is made within that time. B. No, the loan has not been delinquent for 45 days. C. No, the notice is optional. D. Yes, eligible borrowers should receive a notice when the loan is delinquent by 30 days

The correct answer is a. 12 USC section 1701x(c)(5)(B) Outline II B The bank must provide the homeownership counseling notice before the loan is delinquent for 45 days. If the borrower makes the payment within that time period, the bank does not have to send the notice.

Issuing Bank, a foreign bank, maintains an account with First National Bank, a U.S. bank. Issuing Bank issues a letter of credit in favor of ABC, Inc., a U.S. corporation. The letter of credit contains a boycott provision. The letter of credit provides that any negotiating bank may obtain reimbursement from Issuing Bank's account at First National Bank by certifying that the conditions of the letter of credit have been met. Issuing Bank does not send First National Bank a copy of the letter of credit. May First National Bank reimburse negotiating banks for the letter of credit when it contains a boycott provision? A. Yes. First National Bank did not know of it, so it may reimburse a negotiating bank. B. No. First National Bank is under a duty to determine the underlying conditions of any letter of credit it pays. C. No. First National Bank should request a copy of the letter of credit at the time of its payment and then refuse to pay once it is aware of the provision. D. Yes, provided ABC Company is not a participant in the boycott.

The correct answer is a. 15 CFR 760.1(e) and 760.2(f) example viii Outline I B(1)(g)

First National is developing a consumer checking account that can access a line of credit. This is the first time the bank has ever had such a product, although this type of credit facility has been popular with other banks in town. To determine what interest rate to charge on this account, an officer of First National called some of his friends at other local banks offering this type of credit and asked several questions, including the interest rate charged on this type of account and what internal factors the banks use to set the rate. After obtaining this information, First National determines that it could charge approximately two percent more than it originally planned. Is there anything wrong with this course of action? A. Yes. Communicating with competitors for purposes of setting prices is wrong. B. No. Communication itself is never wrong regardless of the subject matter. C. Yes. The bank should have disguised its identity in calling its competitors. D. No. The bank could probably have determined the prices eventually without calling the banks directly.

The correct answer is a. 15 USC 1 Outline I A This scenario is an antitrust price-setting problem. The bank is blatantly attempting to lessen competition by setting prices based on the prices of competitors. The whole purpose of the antitrust laws is to prevent this type of price setting.

Stacey Robertson is in the Army Reserve. She has just heard that her unit is being activated, and she will be leaving the country for an indefinite period of time. Her salary in the Army will be close to the salary she has in civilian life. What options does she have under the SCRA to improve her financial situation before she leaves? A. Ask the bank to lower the rate on her installment loan. B. Request a mandatory freeze on the rent she must pay for her apartment. C. Ask her credit card company to suspend charging interest pending her release from active service. D. Apply for assistance from a special SCRA fund that can cover interest payments while she is on active duty.

The correct answer is a. 50 USC Appendix 527 Outline I B(1) Of the options presented, asking the bank to lower the rate on her installment loan is the only option specifically afforded Ms. Robertson under the SCRA.

First Collection Company is collecting a debt from Louetta Pierce. Ms. Pierce informs the company that she has hired an attorney to represent her. She gives the collector the attorney's name and address. The collector calls the attorney and leaves three messages with the attorney's secretary over a two-day time period. Each time the secretary states that the attorney will call that day. He also sends a letter requesting that the attorney call him. Four days pass and he hears nothing. What can the collector do? A. He can call Ms. Pierce directly about the debt. B. He must make at least one more attempt to contact the attorney by phone; three phone calls over a two-day time period are not enough. C. He should send a registered letter to the attorney stating that if the attorney does not contact the company, the collector will call Ms. Pierce directly. D. He should visit the attorney in person if the attorney is in the same city.

The correct answer is a. 15 USC 1692b and 1692c Outline II A(1)(b) The act provides that the collector may contact the debtor if the attorney does not respond within a reasonable time period. Three phone calls over a two-day time period to an attorney who is in town, along with a letter that goes unanswered, should represent a reasonable response time. The collector can but is not required to take the extraordinary measures mentioned in the other choices.

Generally, a financial institution is required to ascertain if securities certificates they have taken by pledge, transfer, or otherwise have been reported as missing, lost, counterfeit, or stolen. When is it NOT required to take such actions? A. When the securities certificate is received directly from the issuer or issuing agent at issuance. B. When the bank officer personally knows the individual pledging the certificate. C. When the securities certificate received as part of a transaction has a face value of $20,000 or less. D. When the securities certificate is received directly from an insured delivery service.

The correct answer is a. 17 CFR 240.17f-1(d) Outline III.A.

Which of the following actions is NOT a custodial requirement of the Government Securities Act? A. Keeping possessory government securities in a vault with dual control access B. Segregating government securities from bank assets C. Keeping government securities free of liens, claims, and charges. D. Issuing safekeeping receipts for securities

The correct answer is a. 17 CFR 450.4(a)(1) and 450.4(b)(1) Outline VII B(2)

ABC Co. signs a contract to export goods to Country G, a boycotting country. Payment will be made by a letter of credit confirmed by First National Bank. The letter of credit requires the goods to be shipped on a ship eligible to enter the port of Country G in conformity with its laws and regulations and that the insurer of the goods has an agent in Country G. Country G's laws prohibit blacklisted ships from calling at its ports and blacklisted insurance companies from qualifying agents in Country G. First National Bank confirms the letter of credit. Did the bank's action constitute an agreement to participate in or cooperate with an international boycott, and is it subject to IRS reporting requirements? A. Yes. The action is an agreement to cooperate with or participate in a boycott and, yes, it is subject to the reporting requirements. B. Yes. The action is an agreement to participate in a boycott but no, it is not subject to the reporting requirements. C. No. Because the bank is not responsible for knowing the laws of Country G, it is not in participation with or in cooperation with a boycott. D. No. The confirmation of a letter of credit is not sufficient to be in participation or cooperation with a boycott.

The correct answer is a. 26 USC 999(a) and (b)(3) Outline II A(2) and B

Which of the following employment practices is NOT legal under ADA? A. Establishing a policy that prohibits hiring alcoholic applicants B. Establishing a policy that prohibits smoking at any time at work C. Holding employees who are certified alcoholics to the same performance standards as other employees D. Refusing to hire an employee who currently uses illegal drugs

The correct answer is a. 29 CFR 1630.16 Outline II B(6) The bank may establish a policy that prohibits hiring applicants (or permits the firing of employees) who are under the influence of alcohol while at work. Because alcoholism is a disability, the bank cannot have a policy of refusing to hire such persons. However, the bank may hold the employee to the same performance standards and rules, (including those against being under the influence of alcohol at work) as the other employees.

In which of the following cases is a notice required to be sent to the accountholder upon receiving a garnishment order related to his account? A. The account had a $500 Federal benefit payment deposited 3 weeks earlier and the account balance is now $700 B. The account has never had a Federal benefits deposited into it and the current balance is $400 C. The account had a $500 Federal benefit payment deposited 3 weeks earlier and the account balance is now -$27 D. The account last had a Federal benefit deposited into it six months prior to the order and the current balance is $250

The correct answer is a. 31 CFR 212.6(e) Outline II F The account has a balance that is required to be protected—the $500 benefit payment. In the other alternatives, there was either no balance in the account, or no benefit payment made within the prior two months.

FA presents cash to the bank and seeks to wire it to his spouse, RA, in Iran. The OFAC list identifies RA as a specially designated national. Under OFAC Regulations, what should the bank do? A. Block the transfer B. Conduct the transfer as requested and take no further action C. Conduct the transfer as requested and notify OFAC immediately D. Conduct the transfer only if the bank determines that Iran is not a blocked country

The correct answer is a. 31 CFR 515 Outline II A

Which of following is not considered consumer credit under the Military Lending Act? A. Residential mortgage B. Credit card loan C. Payday loan D. Unsecured consumer loan

The correct answer is a. 32 CFR 232.3 Outline II A(4) Under the MLA, residential mortgages do not qualify as consumer credit.

ABC Lender is located in a state with a consumer protection law requiring lenders to limit the APR on vehicle title loans to 24 percent. Which of the following is true for ABC Lender? A. ABC Lender must abide by state law and limit its vehicle title loans to 24 percent to servicemembers. B. The federal regulation preempts state law and ABC may charge up to 36 percent since it is governed primarily by state law. C. ABC has a choice of law; it may choose either the federal regulations or the state law. D. ABC may charge up to 36 percent for non-servicemember borrowers.

The correct answer is a. 32 CFR 232.6 Outline II B(3) The lender is required to abide by state law since it provides more protection to the borrower.

A routine review of account records reveals that suspicious activity involving foreign currency has occurred in the account of one of the bank's directors. Which of the following actions should be taken FIRST? A. A SAR should be filed. B. The bank's board of directors should discuss the account activity without the affected director being present. C. The bank's president should meet with the affected director to discuss the account activity. D. The bank should file a CTR, checking the box that indicates the report is for suspicious activity.

The correct answer is a. Any suspicious activity involving an insider requires a SAR. If the activity has occurred (and there is no question that it is suspicious) the bank should file the SAR.

Acme Bank published an advertisement for its new deposit account that has no service charge. The bank advertised the account as a "free" account since there are no charges associated with maintaining the account. If an accountholder overdraws their balance, an overdraft fee will be charged, and if the overdrawn amount is outstanding for more than five days, an additional continuing overdraft charge will be added. What UDAAP issue, if any, is a concern? A. Deception B. Unfairness C. Abusiveness D. None

The correct answer is a. Deception 15 USC 45(a)(2) Outline A(2) The failure to mention the overdraft fee could be construed to meet all of the ''deceptive'' standards

Acme Bank offers its customers Internet banking that includes bill payment services, wire transfer initiation, and access to customer account history. Acme has had to spend a substantial amount of money implementing a multifactor authentication system that will continue to be fairly expensive to operate. Which of the following is the best alternative for Acme that will allow the bank to be in compliance with the FFIEC guidance? A. The bank could provide the multifactor authentication to all customers who use the Internet banking services B. The bank could discontinue offering Internet banking to its customers C. The bank could ask its customers to choose which type of authentication they will use, and disclose the risks involved if the customer decides not to use multifactor methods D. The bank could restructure its Internet banking product to restrict customer account information and allow transfers only to other accounts owned by the customer

The correct answer is a. FFIEC Guidance Outline III A(7) and (9) Cutting back or discontinuing its services is not the best answer for the bank. The customers cannot opt out of the multifactor authentication in high-risk transactions.

Which of the following communications is NOT a consumer report regulated by the Fair Credit Reporting Act? A. A report telephoned by a Bank A loan officer to a Bank B loan officer, describing Bank A's lending experience with a borrower B. A report from a credit bureau to a bank containing general credit information on a consumer C. A bank's written credit reference sent to a department store as requested by the individual with bank credit file information, including other lenders' information from a credit bureau report D. A bank's report to a contractor with credit information on a mutual customer, including references from retailers gathered by the bank at the customer's request

The correct answer is a. Fair Credit Reporting Act, Section 603(d) and 15 USC CH 41 1681a Outline I B A consumer report does not include a report that only contains information about experiences between the person making the report and the consumer. Therefore, a bank can provide information about its own lending experience and not be covered by the Fair Credit Reporting Act.

Mr. Hilliard applied to First National Bank for a car loan. The bank requested a credit report on Mr. Hilliard from the local credit reporting agency and found that he had almost no credit. No negative items were on the report. In addition, Mr. Hilliard had been employed at his job for four months and his previous work experience was difficult to verify. The bank denied his application for a loan and sent him an adverse action notice. What should the bank do under the Fair Credit Reporting Act? A. Notify Mr. Hilliard that a credit report was obtained and give him the name and address of the credit bureau. B. Nothing. The bank has no responsibilities under the Fair Credit Reporting Act because the credit report contained no adverse items. C. In person or over the telephone, explain to Mr. Hilliard that, although the credit report had no negative items, he has too little credit history. D. Give Mr. Hilliard a copy of the credit report.

The correct answer is a. Fair Credit Reporting Act, Section 615(a) and 15 USC CH41 1861m Outline III A(1) That information on the credit report was partially responsible for the credit denial gives rise to the responsibility to report it to the consumer. Even too little credit history is enough reason to report under the Fair Credit Reporting Act. In addition, under ECOA's Regulation B, the reasons for credit denial must be provided either automatically or on request after notice of that right is provided.

Martin Taylor, a loan officer at First National Bank, is a long-time friend of Bill Evans, a local homebuilder. Bill would like a line of credit at the bank and discusses the potential loan with Martin. During the discussion, Martin expresses his desire to build a house one day and Bill offers to build him one "at cost plus five percent." If Martin accepts Bill's offer, can he continue to act as his loan officer? A. No. The value of the gift is too great. B. Yes, if Martin discloses this fact to the bank. C. Yes, if Martin does not let the discount on the house affect his decision-making process. D. Yes, if the bank's code of conduct allows such activity.

The correct answer is a. Federal agency guidelines Outline I A In this case the offer came up for discussion in a lending context. Although Martin and Bill are close personal friends, no amount of disclosure will make a lender-borrower relationship acceptable. The value of what was offered is too great. Martin should excuse himself from any decision making on Bill's lending requests.

ABC National Bank regularly purchases mortgage loans from ACME Mortgage Company, a local mortgage broker. ACME places a mandatory arbitration clause in each of its mortgage documents. ACME believes this clause is necessary because of state laws governing arbitration. Is this clause a problem for ABC National? A. No, unless other predatory or abusive lending practices are evident in the loans sold by ACME. B. Yes, the clause is a sign of an abusive lender, and the bank should not purchase the loans. C. Yes, the bank should make ACME strike the clause from future loans. D. No, this is a common practice and the bank can ignore it.

The correct answer is a. OCC-AL 2003-2 Outline II C. As noted in the outline, use of mandatory arbitration clauses may be a signal that an institution is marketing predatory or abusive loans. However, such clauses are not unfair in and of themselves. In the case of ACME and ABC National Bank, the use of mandatory arbitration clauses does not, in and of itself, indicate a problem.

During a recent compliance examination, regulatory examiners found that the bank was not conducting flood hazard area determinations before closing on construction loans. The compliance professional has reviewed the files and agreed with the examiners' finding. What should be done FIRST? A. Review the bank's flood policies and procedures to determine where the compliance failure occurred B. Conduct a risk assessment of the flood determination requirement on construction loans C. Prepare an analysis for bank management explaining the requirement D. Review all construction loan files to determine the extent of the problem

The correct answer is a. Outline II D If the compliance professional agrees with the regulators on a finding, the root cause of the error must be determined by consulting policies and procedures. There is no benefit to conducting a risk assessment because the issue is known. After determining the cause, then the extent of the problem must be determined. Only after gathering this pertinent information can the compliance professional write an analysis for management explaining the situation.

Which of the following is acceptable proof of the purchase of flood hazard insurance? A. Copy of the declarations page of the insurance policy B. A certificate of insurance C. Flood insurance binder D. Letter signed by the borrower agreeing to purchase the insurance

The correct answer is a. Outline II E(3) Mandatory Purchase of Flood Insurance Guidelines Although FEMA guidelines have been rescinded, they are still applicable and say that there are only two forms of proof of insurance. One is a copy of the declarations page of the policy. The other is the insurance application along with proof of payment. The NFIP does not recognize binders or certificates of insurance.

Flood insurance lapsed on a loan at First Bank on June 1. The bank sent the borrower a notice stating that flood insurance was required and giving the borrower 45 days (until July 15) to reinstate the policy or purchase a new one. If the borrower does not reinstate the flood insurance and the bank force places a policy and charges the borrower for the premium, what date should the force placed policy start coverage? A. June 1 B. June 30 C. July 1 D. July 15

The correct answer is a. Outline II E(4)br>

ACME Bank offers an overdraft protection privilege to all of its checking account customers. All customers are given a $300 overdraft limit at the beginning. The bank will increase the limit upon request, and after a review of the customer's account history. Customers are advised of their individual limits. To which of the following requirements is the bank subject? A. Reporting the total of all unused overdraft limits as unfunded commitments on the call report B. Giving an example to each customer of how the bank treats multiple items presented against the account C. Providing Truth in Lending periodic disclosures to the customers each month when an overdraft occurred D. Placing a cap on the total amount of fees any customer can incur in any one day

The correct answer is a. Outline III L Joint Guidance The bank does not have to give Truth in Lending Act (TILA) disclosures because overdrafts are not covered by the TILA. The provision of an example of how multiple items are treated is a best practice, but it is not required. Also, the placement of a cap on the total amount of fees is a best practice, not a requirement.

Second State Bank offers a mortgage product that involves simultaneous second lien loans. These include a first lien for up to 90 percent of the purchase price and a second loan for the down payment, secured by a second lien on the property. The bank would like to be in full compliance with the Interagency Guidance on Nontraditional Mortgage Product Risks. Which of the following should Second State Bank incorporate into its loan program? A. Risk management procedures to measure the risk of all simultaneous second lien loans and report results to management B. A 100 percent loan loss reserve on all simultaneous second lien loans C. A product combining simultaneous second lien loans with negative amortization features made to nonowner occupied borrowers D. A prepayment penalty on all simultaneous second lien loans

The correct answer is a. Outline V B. The bank should make sure management is aware of the risk of its nontraditional mortgage portfolio, segmented by product.

When all the required information is NOT provided by a person purchasing a cashier's check with $8,000 in currency, what should the bank do? A. Refuse the transaction B. Complete the transaction and record available information C. Complete the transaction and file a SAR D. Complete the transaction and insist that the customer return with the required information

The correct answer is a. Outline VI A, B The bank should not carry out a transaction that will result in a BSA violation.

When completing and filing a SAR, what is the bank NOT required to do? A. Submit a copy of the supporting documentation with the SAR B. Submit the SAR within 30 days of the initial detection of facts C. Report the SAR information to the bank's board of directors D. Maintain a copy of the SAR and supporting documentation for 5 years

The correct answer is a. SAR Instructions Outline XI B(1)(d)

In order to improve the efficiency and effectiveness of its Right to Financial Privacy Act compliance program, what should a bank do FIRST? A. Centralize the receipt and handling of all government agency requests for customer records with a designated officer B. Include in the bank's loan application an authorization for customers to sign, giving the bank permission to disclose financial records to government agencies as needed C. Simplify the bank's handling process by adopting a policy that the bank will accept only judicial subpoenas for customer financial records D. Create an ongoing training program on the Right to Financial Privacy Act for all bank officers and employees

The correct answer is a. The bank should also implement a training program, but centralizing the requests is the best way to make the compliance program effective and efficient. Having all customers sign an authorization would not be effective in the long term.

Borrower A has a variable rate loan secured by his principal dwelling for a term of 10 years. Which of the following is NOT a Truth in Lending requirement for his loan? A. Providing a variable rate disclosure of certain terms of the loan program at the earlier of the application time or before a nonrefundable fee is paid B. Limiting the number of interest rate increases in each calendar year C. Including an interest rate cap in the loan contract D. Providing a consumer handbook on adjustable-rate mortgages to the borrower

The correct answer is b. 12 CFR 1026.19(b)(1) and (2), 12 CFR 1026.30, 12 CFR 1036.37(b)(6)(II) Outline V D( 2)(q)(vi) There is no requirement in Regulation Z for the lender to limit the number of interest rate increases in any calendar year. However, a lifetime interest rate cap must be included in the contract and must be disclosed.

Which of the following charges is generally considered to be a prepaid finance charge? A. Points paid by the borrower in cash at closing B. An application fee of $250 paid in cash at the time of application and collected from all applicants whether or not the application is approved. C. A $300 fee for an appraisal in a real estate transaction D. A $750 fee for a title policy in a real estate transaction

The correct answer is a. The following sections of Regulation Z: 12 CFR 1026.2(a)(23) definition of prepaid finance charge and 12 CFR 1026.4(c) charges excluded from the finance charge Outline IV A(4)(b)(iii)(c) This fee is a finance charge because it represents a payment to the creditor that is a cost of obtaining the credit. The other fees are specifically exempt from the definition of finance charge. Application fees charged to all applicants, whether or not credit is actually granted, are not finance charges. The purpose of the fee is to cover the costs of services performed in processing the loan application. The other choices are for services performed in connection with a real estate loan and are excluded from the definition of finance charge.

Which of the following actions subjects a lender to mortgage interest reporting requirements? A. The lender holds mortgage loans in the course of its trade or business. B. The lender is a qualified FHA or VA lender. C. The lender receives at least $500 in interest on a mortgage loan during a calendar year. D. The lender offers unsecured home improvement loans.

The correct answer is a. Treas. Reg. Section 1.6050H-1(b)(2) and 1.6050H-1(c) Outline I B and C Lenders that hold mortgages in their regular course of business are required to report interest received if the interest is $600 or more.

Information reports must include which of the following details? A. Name, address, and TIN of the borrower B. Purpose of the loan C. Address of the property securing the mortgage D. Fair market value of the property at the time of the loan

The correct answer is a. Treas. Reg. Section 1.6050H-2(a)(2)(i) Outline I C The names, addresses, and TINs of the interest payor and the interest recipient are required on the information return.

First National Bank would like to establish a policy regarding the evaluation of loans that are not subject to the appraisal requirement. Which of the following is acceptable in this policy? A. All loans under $250,000 secured by real estate must have an evaluation in the file. B. All loans that do not require an appraisal by a state-certified appraiser must have an evaluation. C. The evaluations generally will be performed by the loan officer responsible for the transaction. D. Evaluations may be performed by any loan officer in either commercial or consumer lending as well as any credit analyst.

The correct answer is a. Various regulatory issuances Outline V According to the appraisal regulation, evaluations are required if the loan is exempt from the requirement to obtain an appraisal under either the business loan exemption, the renewal exemption, or the $250,000 threshold rule. Therefore, although the policy is more expansive than it needs to be, answer (a) is correct. An appropriate category for requiring evaluation is real estate loans under $250,000. Answer (b) is incorrect because, while a loan may not require an appraisal by a state-certified appraiser, it may need an appraisal by a state-licensed appraiser. The last two answers are also incorrect because the regulatory issuances clearly define the persons eligible to perform evaluations for the bank. A loan officer responsible for the loan would not meet the independence criteria. Also, a person performing an evaluation must have real estate training or experience. It is unlikely that all loan officers and credit analysts would have the necessary training or experience.

XYZ bank holding company is purchasing ABC Bank. ABC Bank will retain a separate charter. The compliance officer has been asked to develop a privacy policy and privacy notice for ABC Bank. What should the compliance officer do FIRST? A. Identify all of the information-sharing practices between ABC Bank and third parties B. Obtain a mailing list of ABC Bank's customers to ensure they receive a privacy notice C. Ensure that all of ABC Bank's joint marketing agreements contain confidentiality clauses D. Evaluate whether ABC Bank's systems can electronically support opt-out elections by customers

The correct answer is a. While the other steps may be important, it is necessary to know what ABC Bank's information sharing practices are first.

Which of the following statements regarding applications is correct? A. Applications must be signed to be valid. B. Creditors may accept oral applications. C. Creditors may not develop their own definition for a completed application. D. A creditor is not required to attempt to complete incomplete applications.

The correct answer is b. 12 CFR 1002.2(f) and the Official Staff Commentary on this section Outline II A(2)(c) A creditor may set its own procedures for accepting applications. If the creditor makes a policy that no oral applications will be accepted and, in actual practice, accepts no oral applications, the creditor is in compliance with 1002.2(f) of Regulation B.

When helping a loan officer determine whether the bank must give a written adverse action notice to a business loan applicant, what should the compliance officer consider? A. Current net income B. Gross revenue for the preceding fiscal year C. Length of time the applicant has been in business D. Type of business entity (that is, corporation, partnership, or sole proprietorship)

The correct answer is b. 12 CFR 1002.9(a)(3) Outline II F(2)(g) Gross revenue is the measure for whether a notice must be given to a business applicant.

Under which circumstance would a creditor be allowed to refuse to renew an alternative mortgage parity transaction? A. The borrower made a late payment twice during the first five years of the transaction. B. The borrower refused to keep the house insured for hazards. C. The information on the borrower's past employment history was incorrect by one month. D. The borrower has asked for interest rate relief.

The correct answer is b. 12 CFR 1004.4 Outline II B 2 The other choices are not material.

Which of the following bank products are considered to be transaction accounts? A. A savings account from which the bank pays third parties weekly pursuant to the depositor's written requests mailed to the bank B. A savings account from which the customer regularly makes more than six telephone transfers per month C. A money market certificate of deposit where the interest is credited monthly to another account of the depositor D. A savings account into which weekly deposits are made from a checking account pursuant to the depositor's telephone requests

The correct answer is b. 12 CFR 204.2(e)(4) Outline II F and G In this example the depositor is making more than six preauthorized withdrawals per month on a savings account. It therefore becomes a transaction account.

First National Bank has an overdraft privilege program available to its deposit customers. Under this program the bank generally pays checks, ACH items and recurring debit card transactions presented against accounts up to a pre-set limit. The bank does not pay overdrafts originated as ATM transactions or as one-time debit card transactions. From time to time, however, point of sale transactions initiated by debit cards are presented as preapproved items and, according to the rules of the card association, the bank must pay the transaction as presented. Therefore the bank does have a few overdrafts originated as one-time debit card transactions. Which of the following is a true statement for the bank? A. The bank must provide an opt-in notice to all its customers. B. The bank does not have to provide an opt-in notice, but it cannot charge an overdraft fee on the inadvertent overdrafts created by ATM and debit card transactions. C. The bank does not have to provide an opt-in notice to its customers and it may still charge for inadvertent overdrafts created by ATM and one-time debit card transactions. D. If the bank pays overdrafts originated by check, it must also pay those originated by ATM and one-time debit transactions.

The correct answer is b. 12 CFR 1005.17(b)(4) Outline II G (2)(a) and (4) Institutions that do not authorize payments of overdrafts on ATM or one-time debit transactions are not required to give the notice of affirmative consent to opt-in, but they may not charge a fee for those transactions.

First National Bank is expanding its deposit services and would like to send out debit cards to a group of its customers. However, these cards have not been requested by the customers and the bank does not want to violate Regulation E. How can First National accomplish this? A. No cards may be sent except in response to a request. The bank must send letters soliciting a request for the cards. B. Cards may be sent if they are not validated, if disclosures of consumer's rights are enclosed, and if the card can only be validated by a request from the consumer with proper identification. C. No cards may be sent and no direct solicitation for cards may be made. The bank must rely on general advertising. D. Ready-to-use cards may be sent to the customers provided proper disclosures of the consumer's rights are included along with a notice that use of the card will validate it for all purposes.

The correct answer is b. 12 CFR 1005.5 Outline II D Access devices may be sent to customers who have not requested them provided the device is not validated, the consumer's rights disclosures accompany the device, an explanation of how the device can be validated is included, and the institution validates the device only after a request and with reasonable means of identification such as photograph, fingerprint, or signature.

Jonathan Frys debit card is stolen on October 1, and $100 is taken from his account on October 2. Jonathan notices that his card is missing on October 5. On October 8, $100 is taken from his account. On October 10, the bank sends his monthly statement on the account, showing the two unauthorized transfers. On November 3, $500 is taken from his account. On November 10, another statement on the account is mailed, showing the November 3 unauthorized transfer. On December 5, another $100 is taken from his account. On December 10, the bank sends the monthly statement on the account, showing the December 5 unauthorized transfer. On December 15, Jonathan notifies the bank of the cards loss. For how much of the loss is Jonathan liable? A. $700 B. $500 C. $600 D. $250

The correct answer is b. 12 CFR 1005.6(b) Outline II B(2) Two time periods must be considered when calculating the liability for unauthorized transactions under Regulation E. The first is the time up to 60 days from the date of the transmittal of the periodic statement. The second is the time following this 60 day period. Because no transactions occurred after the sixtieth day from the time the first statement was transmitted, the only period to consider in this case is the time up to the sixtieth day after the transmission of the first statement. For this time period, Jonathan's liability has an overall limit of $500. He is liable for up to $50 between the time of the loss and two days after he learns of the loss. He is also liable for losses that would not have occurred had he notified the bank within two days after he noticed the loss. Because the amount taken during this time period exceeds $500, his total liability is $500.

Regulation E disclosures must FIRST be provided to an EFT customer either at the time the account is opened or at what other time? A. With the first periodic statement B. Before the first EFT occurs C. Within three business days of opening the account D. Within three business days of receiving the customer's request for EFT services

The correct answer is b. 12 CFR 1005.7(a) Outline II A(2)(a)

Under Regulation E, which of the following pieces of information must be included on an ATM receipt? A. The account balance B. The location of the terminal C. The time of day the transfer occurred D. The fact that the transaction will overdraw the account

The correct answer is b. 12 CFR 1005.9(a) Outline II A(3)(b)(v)

Which of the following pieces of information must be included on a periodic statement according to Regulation E? A. The financial institution's business days B. The name of any third party to whom funds were transferred C. A summary of the consumer's liability for unauthorized transfers D. The balance in the consumer's account after each transfer

The correct answer is b. 12 CFR 1005.9(b) Outline II A(8)

When must disclosures on consumer leasing transactions subject to Regulation M be made? A. At the time of the application B. Before the consummation of the lease C. Before the first payment due under the lease D. Within 10 days after consummation of the lease

The correct answer is b. 12 CFR 1013.3(a)(3) Outline II A(5)(a)

A bank does not know all of the specific information to be disclosed on the lease at the time of the consummation. What may the bank do after attempting to obtain the information? A. Omit the unknown disclosures B. Estimate the amounts and note that the information is estimated C. Delay consummation of the transaction until the information is ascertained D. Estimate the information based on averages of all other leasing transactions the bank has made

The correct answer is b. 12 CFR 1013.3(d) Outline II A(5)(d)

Roberta Milton's car lease with First National Bank reached its termination on August 1. Roberta and the bank agreed to extend the lease on a month-to-month basis without charging her a fee for doing so. What disclosure responsibilities does the bank have now? A. None are needed now. B. None, until after six months of the month-to-month lease C. The bank must make an entirely new initial disclosure D. The bank must disclose the estimated residual value at the end of six months

The correct answer is b. 12 CFR 1013.5(b) Outline II A(6)(c) New disclosures are not required unless an extension on a month-to-month basis extends for longer than six months

First National's consumer leasing department placed an ad in the local paper that pictured a car with the caption, "Sign a lease with us and pay only $275 per month." What other information must this ad have? A. A statement that the transaction is not a loan B. The total amount due at consummation or delivery, the number of payments required, and any required security deposit C. The bank's policy regarding the purchase of the property by the lessee D. Disclosures regarding required insurance

The correct answer is b. 12 CFR 1013.7(d)(2) Outline II B(2) Any of the following triggering terms will require full disclosures in the advertisement: the amount of any payment, the number of required payments, or a statement that no down payment or other payment is required at consummation. The information that is required to be disclosed includes the payment information, the total amount due at consummation, and any required security deposit. The bank must also disclose any extra charges required at the end of the lease term if the lessee's liability is based on the difference between the residual value and the realized value of the leased property.

Records regarding compliance with Regulation M must be kept for how long? A. Five years following consummation of the lease B. Two years after the disclosures are made C. Twenty-five months from consummation D. One year from the time the disclosures are made

The correct answer is b. 12 CFR 1013.8 Outline II C

The following accounts are at State National Bank: • John Doe • John Doe and Joe Smith • Mary Smith and Joe Smith • Fred Richards and Mary Smith Assuming the initial privacy notice did not change, what is the minimum number of initial privacy notices the bank must give? A. Three B. Four C. Six D. Seven

The correct answer is b. 12 CFR 1016.4 Outline II A(5) The bank should give at least one notice per account.

Acme Community Bank does NOT disclose any nonpublic personal information about its customers except to its computer processor, to its attorneys for loan documentation, and to a national credit reporting agency. What privacy notices is Acme required to give? A. Initial and annual notices to consumers and customers B. Initial and annual notices to customers C. Initial, annual, and opt-out notices to customers D. Initial, annual, and opt-out notices to customers and consumers

The correct answer is b. 12 CFR 1016.4 and 5 Outline II A and B These activities are all exceptions that do not require initial or opt-out notices.

Acme Mortgage Company owns and services a mortgage loan for John Smith. The company received a statement from Mr. Smith's insurance company indicating that the premium on the hazard insurance has not been paid and that it will be cancelled soon if not paid. Mr. Smith's escrow account has insufficient funds to make the insurance payment. Under what circumstances may Acme Mortgage Company force place hazard insurance on Mr. Smith's property and charge him for the premium? A. Once they notify Mr. Smith and give him an opportunity to make the payment, Acme can force place a policy B. Acme may not force place a policy in this case, it must advance funds to the escrow account to make the payment so the insurance will continue Incorrect C. Acme does not have to give advance notice; once the policy is finally cancelled, they can force place a policy D. Acme can force place a policy as long as it is not more expensive than the original premium

The correct answer is b. 12 CFR 1024.17(5) and 12 CFR 1024.37 Outline II F(7)(b)

Which of the following is a new obligation on mortgage servicers that became effective October 19, 2017? A. Sending an acknowledgement notice 5 business days after receiving a loss mitigation application. Correct B. Sending a notice of complete application 5 business days after receiving a complete loss mitigation application. C. Making live contact with a delinquent borrower no later than 36 days from the borrower missing a payment. D. Providing a written notice to a delinquent borrower no later than 45 days from the borrower missing a payment.

The correct answer is b. 12 CFR 1024.41(c)(3) Outline II E(11)(h) Effective October 19, 2017, servicers are required acknowledging receipt of complete application.

A loan officer is making a first mortgage purchase-money loan to enable an individual borrower to purchase a triplex. The individual will live in the upper unit and plans to rent the lower two units of the triplex. The loan will be for $245,000 for five years. Why does RESPA NOT apply to this loan? A. The loan is covered by Regulation Z B. The loan is primarily for business purposes C. The loan is for an amount that exceeds $25,000 Incorrect D. The loan is secured by a first lien on a multifamily dwelling

The correct answer is b. 12 CFR 1024.5(b)(2); 12 CFR 1026.3(a)(1) and Official Interpretation to 3(a)5.i. Outline I D(1) Business purpose loans are exempt from RESPA coverage. Business purpose loans are exempt from RESPA coverage.

If a loan is to be secured by a consumer's principal dwelling, which of the following actions is prohibited with regard to an appraiser? A. The banker does not understand the comparable values in an appraisal and asks the appraiser to clarify the information. B. The banker tells the appraiser that the appraisal will need to show that the property is worth at least $100,000, or the bank will not be able to make the loan. C. The banker notices that there is a factual error in the appraisal and asks the appraiser to correct it. D. The banker refuses to pay for an appraisal submitted past the date that the appraiser agreed to provide it.

The correct answer is b. 12 CFR 1026. 42 (c)(1) Outline VII F(2) A banker's disclosure to the appraiser of the minimum required property value necessary to approve the loan is considered an attempt to influence or encourage the appraiser to value the property at least that amount.

A consumer customer reports to First National Bank's credit card department that his credit card periodic statement contains an amount that is incorrect. What should the bank do? A. Begin an investigation of the alleged error but require the consumer to pay the disputed amount pending the completion of the investigation B. Conduct an investigation and mail within 30 days an acknowledgment of the error notice, a correction of the error, or a notice that there is no error C. Complete an investigation of the error in no more than 60 days D. Conduct a reasonable investigation of the alleged error and report the disputed amount to the credit bureau as delinquent

The correct answer is b. 12 CFR 1026.13(c), 1026.13(d), and 1026.13(f) Outline VIII J(4) The creditor must either mail an acknowledgment of the error within 30 days or complete its investigation and notify the consumer of its findings within 30 days. The creditor must complete an investigation of the alleged error within two complete billing cycles after receiving notice of the error from the consumer, but in no event more than 90 days. The creditor may not attempt to collect the disputed amount and may not make an adverse credit report concerning the disputed amount until the investigation is complete and the consumer has an opportunity to pay.

First National Bank agreed to make a rescindable closed-end home improvement loan to Mr. and Mrs. Smith. The Notice of the Right to Rescind was given to the Smiths on Tuesday at the closing of the loan along with the material disclosures. The Smiths purchased a title policy and paid for a property appraisal for the bank in connection with the transaction. A lien was filed against the Smiths' home on Tuesday afternoon. The bank funded the loan on Friday morning at the request of Mr. Smith by crediting the Smiths' joint checking account with the loan proceeds. On Friday afternoon Mrs. Smith has a change of heart concerning the transaction and deposits a rescission notice in the mail to the bank. The bank receives the notice on Tuesday morning. All funds have been withdrawn from the account. What should the bank do? A. Notify the Smiths that the loan proceeds are immediately due and payable and that once the funds are repaid, the lien on the property will be released B. Release the lien on the property immediately, then refund to the Smiths the amounts they spent for the title policy and appraisal, and then demand repayment of the loan (without interest) Incorrect C. Release the lien on the property immediately, and then send a written request to the Smiths asking for repayment of the loan proceeds (without interest) D. Send a letter to the Smiths explaining that because the rescission notice was not sent within the proper time period, it is ineffective and the loan is still valid

The correct answer is b. 12 CFR 1026.23(d) Outline IV D(6) If the consumer rescinds before midnight of the third business day after the later of (1) consummation, (2) receipt of the notice of the right to rescind, or (3) the receipt of the material disclosures, the rescission is effective. In this case, the last day to rescind would have been Friday at midnight. Therefore, Mrs. Smith's rescission notice was effective, and the transaction was properly rescinded. Once a transaction is rescinded, the creditor must release any lien within 20 days and tender to the consumer any amounts paid in connection with the transaction, even though the money may not have represented profit to the creditor. In this case, the cost of the title policy and appraisal would have to be refunded by the bank. Once the creditor has fulfilled these responsibilities, the consumer must tender any funds advanced to him or her. The bank should have been careful not to fund the loan until it was reasonably sure the borrowers had not rescinded it. What should the bank do?

Which statement is NOT true regarding the application disclosure made by the lender on a home equity open-end plan? A. Disclosure must be made at the time the application is provided B. Disclosure must be in a form the borrower can keep C. Disclosure must describe the security interest and warn that in the event of default the borrower could lose the dwelling D. Disclosure must describe payment terms

The correct answer is b. 12 CFR 1026.5(a)(1) Outline VIII F(2)-(4) The initial disclosures provided to the borrower on a home equity plan may be on the application itself and do not have to be in a form the consumer can keep.

Sam owes a balance of $5,000 on his credit card account at Bank B. His minimum payment is $150 per month. $1,000 of his balance is accruing interest at 3% (a promotional rate); the remaining balance is accruing interest at 14%. Sam received a bonus at work and submitted an additional payment of $500 on his account this month. Which statement is true regarding the bank's responsibility for applying the extra payment? A. If Sam specifies the balance to which the extra payment should be applied, the bank must honor his request B. The bank should apply the extra payment to the balance accruing at the 14% rate C. The bank may apply the extra payment at its own discretion D. The bank should pay off the oldest balance first, regardless of the interest rate

The correct answer is b. 12 CFR 1026.53(a) and (b)(2) Outline IX E The bank must apply extra payments to the highest accruing balance. Requests from the consumer on how to apply the payment may be honored at the bank's discretion.

In an open-end account that is NOT a home equity plan, which of the following does NOT have to be provided to the consumer? A. An initial disclosure statement B. A brochure with a transaction example of a $1,000 balance for six months Incorrect C. A periodic statement D. A statement of billing rights

The correct answer is b. 12 CFR 1026.6 (b)(3), 1026.7, and 1026.9 Outline VIII B, C, and D No disclosures of specific examples are required on open-end accounts other than home equity plans. The disclosures described in the other choices are required

The State National Bank credit card program includes an annual fee that equals a percentage of the average balance of the account during the previous year. Of the following statements, which is true regarding the Truth in Lending requirements applicable to this fee? A. Truth in Lending prohibits charging a fee based on a percentage of a balance. B. The bank must disclose in the initial application or solicitation either the fee amount or the percentage amount and identify the amount against which the percentage is based. Incorrect C. The consumer must affirmatively agree in writing to pay this fee before the bank can charge it. D. The bank must give the consumer 30 days' notice every year before the fee is charged and allow the consumer to cancel the account before it is assessed.

The correct answer is b. 12 CFR 1026.60(a)(3) Outline VIII H(7)(a)

When credit card checks accessing open-end accounts (not home secured) are sent to a borrower and the finance charge terms are not different than originally disclosed, when must the disclosures be displayed prominently on the front page of the checks? A. When provided at the time the account is opened B. When provided more than 30 days after the account is opened C. When provided in the same envelope as the credit card D. When provided more than 10 days after the account is opened

The correct answer is b. 12 CFR 1026.9(b)(3) Outline VIII E(2)(c)

Which of the following accurately describes disclosure requirements under Regulation DD? A. Reference must be made to all required disclosures regardless of whether they apply to a particular deposit account. B. The effects of closing an account must be disclosed if accrued interest may not be paid to the consumer. C. Check printing charges must be disclosed for accounts where checks are required. D. If interest is compounded, the frequency of compounding need not be disclosed if crediting of interest practices is disclosed.

The correct answer is b. 12 CFR 1030.4(b)(2) Outline II B(1)(b)(vii)

First National Bank offers a money market account that has a $500 minimum balance and offers tiered interest rates that begin at .75 percent and progress to 1.5 percent, depending on the minimum balance each month. The account has a transaction fee of $5 per month, charged only if the average balance drops below the $500 minimum during the month. If the balance stays above this amount, the customer pays no fee. Which of the following is permissible in an advertisement for the account? A. Interest rate: 1.25 percent; annual percentage yield: 1.5 percent B. $500 minimum balance required C. Free money market checking D. 1.25 percent interest

The correct answer is b. 12 CFR 1030.8(c)(3) Outline II D The tiered rates must be disclosed. The bank cannot simply disclose the rate available for the highest balances. The account cannot be described as free because a transaction fee applies to it. The rate cannot be expressed solely as an interest rate. The annual percentage yield must be disclosed.

On a nontransferable certificate of deposit, which of the following activities is NOT allowed? A. The customer's certificate is redeemed early owing to his or her death. B. The customer discounts the certificate on a public market. C. The customer pledges the certificate against his or her consumer loan. D. The certificate is redeemed through the judicial action of a creditor exercising its legal remedies under the law.

The correct answer is b. 12 CFR 204.2(f)(1)(iii) Outline II E(6) and (7) The nontransferable nature of a time deposit is not affected by its pledge as collateral on a loan, by transactions relating to the death, marriage, divorce, or incompetency of the depositor, or by transactions relating to attachment or other operations of law.

Which of the following is a true statement regarding the imposition of charges for reserve deficiencies? A. A penalty is always required for deficient reserve balances B. Federal Reserve Banks may waive penalties for deficient reserve balances C. An institution may choose to pay a penalty or maintain excess reserves during the next reserve period D. Penalties are optional with the Federal Reserve Bank in all circumstances

The correct answer is b. 12 CFR 204.6(b) Outline III E (3) The Federal Reserve may waive charges for deficiencies except when the institution is guilty of gross negligence.

When may the Federal Reserve institute supplemental reserve requirements in addition to the basic reserve requirements? A. When additional balances are needed for clearing purposes B. When supplemental reserves are needed to impose monetary policy C. When additional balances are needed to supplement the regular reserve cost structure D. When the President directs it by Executive Order

The correct answer is b. 12 CFR 204.7(a) Outline V A (1) Supplemental reserves are only permissible if they are essential to the imposition of the Federal Reserve's monetary policy.

It is the policy of First Safe Bank to offer credit life insurance and accident and disability insurance to all consumer loan customers. What procedures fulfill the disclosure requirements for the bank? A. Place a sign on loan officers' desks that provides the disclosures and give each customer a written disclosure at loan closing. B. Give each customer the disclosures orally at the time of application and in writing at loan closing. C. Only a written disclosure at closing is necessary. D. Only give disclosures to persons who actually purchase the insurance.

The correct answer is b. 12 CFR 208.84; 12 CFR 14.40; 12 CFR 343.40, 12 CFR 136.40 Outline III C All required disclosures must be given orally and in writing. If the bank offers the insurance it must provide the oral disclosures at the time of application. If the customer indicates that he or she wants to purchase the insurance, or if the bank solicits the customer again at loan closing, the bank must provide the written disclosures at closing.

Which of the following types of security devices is required for each bank, at minimum, under the Bank Protection Act? A. Full-time security guard B. Tamper-resistant locks on exterior windows and doors C. Vault door made of steel that is at least 3 inches thick D. Bullet-proof glass at all windows

The correct answer is b. 12 CFR 21.3, 12 CFR 208.61(b) and (c)(2), and 12 CFR 326.3(b) Outline I B(1) The regulations only prescribe four specific security devices: a means of protecting valuables, a lighting system around the vault, tamper-resistant locks, and an alarm system. Any additional security devices deemed appropriate by the bank's security officer and board of directors are acceptable under the regulation, assuming they adequately protect the bank.

For what can a Federal Reserve Bank be liable when transmitting payment orders through the Fedwire? A. Consequential damages B. Interest on funds not properly received C. Any damages by agreement with the sender D. Punitive damages not set forth in an agreement

The correct answer is b. 12 CFR 210.32(a) and (b) Regulation J Outline VIII C

Which of the following relationships does NOT violate Regulation L? • Relationship A: First National Bank is located in the same city as an affiliate of First Savings and Loan. First National and the affiliate share a board member. • Relationship B: State Bank and an affiliate of First National Bank are located in the same RMSA . State Bank has assets of $60 million, and the affiliate has assets of $7 million. The two institutions share a board member. • Relationship C: Savings and Loan Association and Bank Holding Company do not have offices within the same RMSA. Bank Holding Company's assets are in excess of $1.75 billion, and Savings and Loan Association's assets are in excess of $2.5 billion. These institutions share a board member. A. Relationship A B. Relationship B C. Relationship C D. All the relationships violate Regulation L

The correct answer is b. 12 CFR 212.3, 12 CFR 26.3, 12 CFR 348.3, 12 CFR 196.3 Outline II A(2) Relationship B does not violate Regulation L because to be covered by the restrictions of Regulation L both institutions within the same relevant metropolitan statistical area must have assets of at least $50 million.

How may a bank limit the definition of executive officer? A. By strictly defining, in writing, the duties and responsibilities of the officers to be excluded from the definition B. By passing a board of directors resolution setting forth the bank's definition of an executive officer C. By requiring that those officers to be excluded from the definition not attend loan committee meetings or loan review meetings D. By limiting the amount of confidential information given to those officers to be excluded from the definition

The correct answer is b. 12 CFR 215.2(e) Outline I A(3) and (4) The board of directors may exclude officers from the definition of executive officer, but such a resolution will not be effective if the officer actually participates in major policymaking at the bank.

Which directly incurred costs are reimbursable to a bank for assembling or providing customer financial records to a government authority? A. Internal Revenue Service summons B. Document reproduction and shipping costs C. Financial records relating to government loan programs D. All financial records, whether identifiable to a particular customer or not

The correct answer is b. 12 CFR 219.3(a) Outline II A and B These are the only costs that are directly related to the request.

Which of the following practices is authorized by the Federal Reserve Act? A. An agreement by a bank that it is responsible for the obligations of its subsidiary B. A bank's purchase, in its fiduciary capacity, of the affiliate's assets if the fiduciary instrument allows for such a purchase C. The sale of a nonaccruing loan from a bank to its bank affiliate D. The acceptance of an affiliate's securities of an affiliate as collateral for a bank's loan from the bank to the affiliate

The correct answer is b. 12 CFR 223.3(h)(B)(3) Outline I B(3)

First National Bank receives an order from a federal court to supply financial information pursuant to a request from the U.S. Attorney. The request is made pursuant to the Federal Rules of Civil Procedure in connection with a lawsuit involving the Federal Aviation Administration and a customer of the bank. The bank hires an attorney to review the order and to advise the bank of its liability for various courses of action. The bank pays the attorney $1,500. The bank spends 50 employee hours to retrieve in-house records and charges the government $22 per hour. The bank also makes 450 photocopies at a professional copy company at $0.20 per copy. Which costs incurred by the bank are reimbursable? A. The hourly employee expense at $22 per hour and the photocopying expense are reimbursable to the bank. B. None of the expenses is reimbursable. C. All of the expenses are reimbursable. D. Except for the attorney's fees, the expenses incurred by the bank are reimbursable.

The correct answer is b. 12 CFR 219.4(g) Outline III G Expenses for producing records sought by a government agency under the Rules of Criminal or Civil Procedure in connection with litigation where the parties are government and the customer are not reimbursed by Regulation S.

Which of the following loans does NOT require flood insurance? • Loan A is a commercial loan that has been on the books for two years and has been renewed twice. Flood insurance was legally required on the loan at the time it was made. There was a flood insurance policy in effect at the loan's inception, but it expired and was not renewed. • Loan B is a consumer loan secured by a mobile home that is located in a flood hazard area in which federal flood insurance is not available. • Loan C is a commercial loan that the bank would be willing to make on an unsecured basis, but the borrower has offered some commercial real estate property as collateral. The property has one vacant building on it, and it is in a flood hazard area in a community where federal flood insurance is available. A. Loan A B. Loan B C. Loan C D. None of the loans

The correct answer is b. 12 CFR 22.2 and 22.3, 12 CFR 339.2 and 339.3, 12 CFR 208.25(b) and (c), and 12 CFR 572.2 and 172.3 Outline I A The properties securing Loans A and C are located in special flood hazard areas and in communities where federal flood insurance is available; therefore, flood insurance is required. Loan A is required to have flood insurance for the entire term. The bank must check at each renewal to make sure the insurance is still in effect.

Which of the following is NOT included in the definition of margin stock? A. Stock traded on a national securities exchange B. Nonmargin stock convertible to margin stock C. Debt securities convertible to margin stock D. Warrants to purchase margin stock

The correct answer is b. 12 CFR 221.2 Outline I D The Federal Reserve Board staff has consistently ruled that nonmargin stock convertible to margin stock is not considered to be margin stock until its conversion.

In evaluating the coverage of a bank's Regulation U compliance for loans to purchase or carry margin stocks, which of the following securities is NOT covered in the regulatory definition of "margin stock"? A. Any OTC stock B. A security issued by an investment company that is licensed under the Small Business Investment Act C. A warrant or right to subscribe to, or purchase, a margin stock D. An equity security registered, or having unlisted trading privileges, on a national exchange

The correct answer is b. 12 CFR 221.2(5)(a)(i) Outline I D(5)(a) All of the alternatives except for (b) are specifically included in the coverage. Securities issued by an investment company licensed under the SBA Act is specifically exempted from coverage.

For which of the following must a bank obtain Form FR U-1 when a loan is in excess of $100,000? A. A loan made to purchase margin stock B. A loan secured by margin stock C. A loan made to purchase margin stock and secured by margin stock D. A loan secured by stock (either margin or nonmargin)

The correct answer is b. 12 CFR 221.3(c) Outline II D

Under Regulation U, prior to extending credit secured by margin stock for more than $100,000, a national bank must obtain which of the following? A. Certificate of value for the collateral B. Written statement from the borrower as to the purpose of the loan C. Written statement certifying the borrower's business address and daytime phone number D. Notice from the borrower as to his willingness to provide additional margin stock as collateral

The correct answer is b. 12 CFR 221.3(c) Outline II D(1) The borrower's statement of purpose is part of Form FR U-1, which is required for this type of loan

First National Bank and Fidelity Bank are subsidiaries of Bank Holding Company, Inc. Fidelity is planning to sell First National two loan participations. It has been Fidelity's practice for several years to sell overlines to First National. • Loan A has been on Fidelity's books for two years. It is a line of credit that will be over Fidelity's loan limit with its next advance. It was recently classified as special mention during a safety and soundness examination. First National agreed to purchase overlines on Loan A before Fidelity's funding of the loan two years ago and signed a participation agreement at that time. • Loan B is 60 days past due for a principal payment, although interest payments are current. The loan has been on the books at Fidelity for one year. First National agreed to purchase overlines on Loan B six months ago. Which, if any, of these loans can First National purchase? 12 CFR 223.15 Outline II C(1) First National agreed to purchase Loan A before its being acquired by Fidelity. Therefore, even though it is now a low-quality asset, First National can purchase it. Loan B is also a low-quality asset, but First National did not agree to purchase it before its being acquired by Fidelity, so it cannot participate in the loan now. A. Neither, both are low-quality assets B. Loan A only C. Loan B only D. Both Loan A and Loan B

The correct answer is b. 12 CFR 223.15 Outline II C(1) First National agreed to purchase Loan A before its being acquired by Fidelity. Therefore, even though it is now a low-quality asset, First National can purchase it. Loan B is also a low-quality asset, but First National did not agree to purchase it before its being acquired by Fidelity, so it cannot participate in the loan now.

First National Bank is a wholly owned subsidiary of Bank Holding Company, Inc. Which of the following companies is NOT an affiliate of First National Bank? A. A company that owns 60 percent of Bank Holding Company, Inc. B. A company of which First National owns 100 percent of the stock, set up solely to hold the title to the First National Bank building C. A company established to sell securities and that is 100 percent owned by Bank Holding Company, Inc. D. Another bank that is owned by Bank Holding Company, Inc.

The correct answer is b. 12 CFR 223.2 Outline I A

First National Bankshares, Inc., a bank holding company, held substantially all of the voting stock of an equipment manufacturing corporation as collateral for a loan to the owner. On May 15 the borrower defaulted and on September 1, after proper notice was given, the bank foreclosed its security interest on the stock and exercised its rights to vote the stock at appropriate times. On December 31 the bank transferred the stock to a subsidiary corporation, FNB, Inc., to market the stock for sale more effectively. What is the longest time period that FNB, Inc., can possibly hold the stock? A. Up to two years from September 1 B. Up to five years from September 1 C. Up to two years from December 31 D. Up to five years from December 31

The correct answer is b. 12 CFR 225.22(d) Outline V C(1) Property that is a DPC acquisition (that is, acquired in connection with a debt previously contracted) can be held for up to two years. On request the Federal Reserve Board may grant up to three additional one-year extensions of this time period. Real property or property that can be demonstrated to have the characteristics of real property may be held for longer time periods. The transfer of property to a subsidiary of the bank holding company does not extend the time period for which it can be held.

Which of the following activities is NOT a permissible nonbanking activity? A. Servicing mortgage loans B. Providing general courier services to the businesses around the bank office C. Providing mortgage loan data processing services to mortgage companies D. Acting as a broker for credit life insurance

The correct answer is b. 12 CFR 225.28(b)(10) Outline V A(2)(q) Courier services may only be provided for banking and other financial records.

First National Bank has made three loans to Mrs. Elmwood. Two of the loans are regulated credits (they are for the purpose of purchasing margin stock and secured by margin stock). The third loan is for the purpose of purchasing margin and nonmargin stock, and the loan is secured by real estate and margin stock. Can the bank avoid having the third loan combined with the other two for Regulation U purposes? A. Yes, but the real estate must have a value of at least twice as much as the third loan. B. No. At least the part of the loan attributable to the security of margin stock must be treated as a regulated credit and combined with the other two loans. C. No. All of the third loan must be combined with the others. D. Yes. As long as there is any other collateral, the loan will not be a regulated credit.

The correct answer is b. 12 CFR 227.3(d) Outline II F

Which of the following institutions is exempt from the coverage of CRA? A. State National Bank of Ashgrove, a $15 million bank in a rural community, not located in an MSA B. Trust Company, Inc., an institution offering only trust services located in a large urban area C. ACME Savings Association, a federal thrift institution located in a medium-sized midwestern city, included in an MSA D. First National Bank, a $250 million bank located in a rural area, not in an MSA

The correct answer is b. 12 CFR 228.11(c)(3); 12 CFR 345.11(c)(3); 12 CFR 25.11(c)(3); 12 CFR 195.11(c)(2) Outline I Certain special purpose banks that do not perform commercial or consumer banking services and banks that engage only in one or more of the following activities: providing cash management controlled disbursement services or serving as correspondent banks, trust companies, or clearing agents are exempt from the coverage of CRA.

Which of the following institutions could be examined for CRA under the intermediate small bank performance standard? A. Bank A, a $230 million bank B. Bank B, a $700 million bank C. Bank C, a $50 million bank D. Bank D, a $2 billion bank

The correct answer is b. 12 CFR 228.12 (u); 12 CFR 345.12 (u); 12 CFR 25.12 (u); 12 CFR 195.12 (u) Outline III D(1) To be an intermediate small bank, the bank itself must have more than $313 million and less than $1.52 billion in assets.

Which of the following is true of a bank's CRA strategic plan? A. It must be limited to a one-year term. B. It must have measurable goals. C. Affiliates are required to have their own plans. D. Even if the bank has multiple assessment areas, it is only allowed to have one strategic plan.

The correct answer is b. 12 CFR 228.27(d); 12 CFR 345.27(d); 12 CFR 25.27(d); 12 CFR 195.27(d) Outline III E(3)(b) If the plan has multiple years, there must be interim, measurable goals.

Which of the following must a "large" bank maintain as part of its CRA program? A. A record of director, officer, and employee community involvement, and a listing of loans made to low- and moderate-income individuals B. Description of its assessment area, written comments and responses, and the public portion of the regulator's most recent CRA performance evaluation C. Copy of the bank's CRA Notice and the bank's most recent five years of CRA disclosure statements D. A comprehensive record of all CRA-related training completed by employees during the past two years

The correct answer is b. 12 CFR 228.43(a) and (b); 12 CFR 345.43(a) and (b); 12 CFR 25.43(a) and (b); 12 CFR 195.43(a) and (b) Outline II E This information must be maintained in the institution's public file.

For which of the following deposits is a bank required to give next-day availability (assume that all checks are deposited into the account of the payee)? A. A deposit of pesos B. A deposit of a Social Security check by mail C. A deposit of a U.S. Postal Money Order by mailD. The deposit of a cashier's check through the night deposit box

The correct answer is b. 12 CFR 229.10(c)(1)(i) Regulation CC Outline II A(3) This type of deposit does not need to be made in person to a bank employee to be eligible for next-day availability.

First National has an account for Mary Jones, who has had several overdrafts in her account over the past few months. On February 15, she overdrew her account and had a negative balance, which lasted for 10 days. As of March 14, the number of negative days in the statement cycle was three; and as of April 14, the number of days was six. The last overdraft occurred on May 14, and the account was overdrawn for three days. Mary has not been overdrawn since May. First National has extended the holds placed on all deposits to her account. How long can the bank continue to subject her account to extended hold periods? A. Until May 14 B. Until October 14 C. Until July 14 D. Until April 14 of the next year

The correct answer is b. 12 CFR 229.13(d) Regulation CC Outline III E(4)

A municipal securities principal must directly supervise municipal securities operations. This includes reviewing all but one of the following. Which task is NOT involved in directly supervising municipal securities operations? A. Opening the customer's account B. Providing quotations to customers C. Handling customer complaints D. Handling a municipal securities transaction

The correct answer is b. MSRB Rule G-27 Outline II P

First National's funds availability policy states that funds from checks are generally available for withdrawal on the next business day following the day of deposit. The policy also states that longer holds may be required on a case-by-case basis and advises customers to ask if they need to be sure of the availability of a specific deposit. Henry Cranston deposited a check into his account on Monday. Henry needed to use the funds on Tuesday but he did not ask about the availability at the time of the deposit. A bank teller accepted the deposit and gave Henry a receipt. After Henry left the bank, the teller's supervisor noticed the check and decided that a longer hold needed to be placed and the funds would not be available until Wednesday . Which of the following actions must the bank perform? A. The bank must make the funds available on Tuesday, because Henry was not notified at the time of the deposit. B. The bank may hold the funds for a longer time period but must send Henry a hold notice. C. The bank may hold the funds for a longer time period and need not notify Henry because he did not ask about the availability of the deposit. D. The bank may hold the funds for a longer time period and may, at its option, send Henry a notice of the delay.

The correct answer is b. 12 CFR 229.16(c)(2) Regulation CC Outline V C The bank must send Henry a hold notice even if it is sent after the deposit is made. Notice must be sent no later than the first banking day following the day of the deposit.

In order to qualify for the fraud prevention adjustment an issuer must: A. Prove that it has historical losses that average at least 1% of its transactions each calendar year B. Implement fraud prevention and detection policies C. Offer identify theft protection to its cardholders D. Allow debit transactions to be processed on at least three unaffiliated payment card networks

The correct answer is b. 12 CFR 235.4(b)(1) Outline II A(3)

What is the purpose of the lending limit regulation? A. To ensure that banks and savings associations do not lend out more money than they receive from depositors B. To promote safety and soundness by preventing an excessive amount of loans to one person or related persons C. To promote competition between lending institutions D. To require banks and savings associations to prohibit lending to certain identified industries

The correct answer is b. 12 CFR 32.1(b) Outline introduction

Which of the following is an exception from the lending limit regulations for national banks and savings associations? A. A standby letter of credit B. A commercial letter of credit C. A loan made to a foreign government D. A loan made to a dairy farmer

The correct answer is b. 12 CFR 32.2(g) Outline I B(7) Commercial letters of credit are not included in the definition of contractual commitment to advance funds.

First National Bank has a general lending limit of $150,000 and an additional limit of $100,000 for loans that are fully secured by readily marketable collateral. The bank has outstanding to Peter Phillip an unsecured loan for $150,000. Which of the following is legal? A. The payment of an overdraft on Mr. Phillip's account B. An additional unsecured loan to Mr. Phillip where the entire loan is sold as a participation to a correspondent bank without recourse to First National C. The issuance of a standby letter of credit for the account of Mr. Phillip D. The extension of credit to a general partnership in which Mr. Phillip is a partner

The correct answer is b. 12 CFR 32.2(q) Outline I B(4) and (7), and C(6) Options a, c, and d will not work for the following reasons: Overdrafts, standby letters of credit, and loans to a partnership (which are considered loans to the partners) would all be considered extensions of credit and thus count in the lending limit to the borrower. Option b involves a participation sold without recourse to the selling bank or association, which would not be counted in the lending limit to the borrower.

How often must a national bank or savings association calculate its lending limit? A. Every day B. At the end of each quarter or when its capital changes C. Every time it files the Consolidated Report of Condition and Income (call report) D. At the end of each month

The correct answer is b. 12 CFR 32.4 Outline III

Venture Ltd. is a limited partnership. ABC Corp. is a general partner of Venture Ltd. In addition, Venture Ltd. has several limited partners, including XYZ, Inc., a subsidiary of ABC Corp. ABC Corp. is owned by Holding Company, Inc., and both ABC Corp. and XYZ, Inc., were chartered for and are principally engaged in providing services to Holding Company, Inc., an equipment manufacturing company. ABC Corp., XYZ, Inc., and Venture Ltd. all have loans with Sanderson Savings Association. Which, if any, of the loans must be combined? A. ABC Corp. and XYZ, Inc., only B. ABC Corp., XYZ, Inc., and Venture Ltd. C. ABC Corp. and Venture Ltd. only D. None of the loans must be combined

The correct answer is b. 12 CFR 32.5(e) Outline IV A and C Because ABC Corp. is a general partner of Venture Ltd., loans to Venture and ABC must be combined under the partnership rules. XYZ and ABC must be combined under the common enterprise test. Each receives revenue from the same source (Holding Company) and therefore the source of repayment is probably the same. Also, each exists simply to provide services to the same company, and they are therefore financially interdependent.

When maintaining an account involving a fiduciary, what must be done with the evidence of the fiduciary relationship? A. It may be kept by the depositor in his or her records at home or at his or her place of business. B. It must be expressly disclosed in the deposit account records. C. It may be maintained by the depositor or the bank as long as the records are clear. D. It must be forwarded to the FDIC at the time of account opening.

The correct answer is b. 12 CFR 330.5(b) Outline IV

Assuming that the following are interest-bearing accounts at First National Bank and the SMDIA is $250,000: Single Accounts Balances Joint Accounts Balances Jim $300,000 Jim and Fred $180,000 Fred $350,000 Fred and Jim $160,000 Susan and Jim $200,000 How much of Fred's money is covered by deposit insurance? A. $520,000 B. $420,000 C. $350,000 D. $170,000

The correct answer is b. 12 CFR 330.6 and 330.9(b) Outline III A and B Fred's single ownership account is insured only to $250,000 and $100,000 is uninsured. His one-half interest in the $180,000 joint account and his one-half interest in the $160,000 joint account are fully insured for $170,000 total.

Which of the following groups of employees should be trained on the detailed use of W-9 forms? A. Senior management B. New account officers C. Auditors and accountants D. Security officers

The correct answer is b. New account officers are the ones who need to know the detailed rules for 1099 reporting so they can properly code accounts to allow the bank's system to compile the information at year end.

ABC Bank failed with the following accounts for Natalie Nguyen on its books: • A certificate of deposit in the name of Natalie Nguyen with a principal balance of $225,000 and accrued interest of $5,000 • A savings account in the name of Natalie and her mother Sheila with a balance of $600,000 • An IRA for the benefit of Natalie with a balance of $350,000 • An account styled Natalie Nguyen payable on death to Monica Williams (Natalie's best friend) with a balance of $200,000 If the SMDIA is $250,000, how much of Natalie's money is insured? A. $980,000 B. $930,000 C. $750,000 D. $830,000

The correct answer is b. 12 CFR 330.6, 330.9, and 330.10 Outline III A, B, and C Natalie's certificate of deposit is a single ownership account and is insured for the full principal balance of $225,000. The interest also is insured because adding it will not make the account over the SMDIA limit. Natalie's interest in the joint account with her mother will be insured up to the SMDIA limit of $250,000. Her remaining $50,000 interest will be uninsured. The IRA is insured up to the limit of the SMDIA. $100,000 of the IRA is uninsured. The account that is payable on death account to her friend Monica is fully insured.

Greg Smith, a real estate lending officer at XYZ Bank, is planning to make a $500,000 loan to Milton Womack, a good customer, to purchase a piece of commercial real estate from a local real estate broker. The loan will have a loan-to-value ratio of 75 percent. Mr. Womack has offered Greg an appraisal given to him by the seller of the property. The appraisal is very complete and is approximately three months old. Greg would like to waive the normal appraisal requirement and simply have the original appraiser update the seller's appraisal because this would save Mr. Womack the money a new appraisal would cost. Can Greg legally use the updated appraisal? Why or why not? A. Yes. Greg may use the appraisal provided it goes through the bank's established appraisal review process. B. No. Greg may not use the appraisal because the appraiser was not engaged by another financial institution. C. No. Greg may not use the appraisal because it is too old. D. Yes. Greg may use the appraisal because it was done so completely, provided he knows the appraiser and has confidence in his work

The correct answer is b. 12 CFR 34.45(b), 12 CFR 225.65(b), 12 CFR 323.5(b) and 12 CFR 164.5(b) Outline III C Under the appraisal regulation, an appraisal prepared for another financial services institution that otherwise meets the requirements of the regulation is acceptable. In this case, the bank needs its own, new appraisal because the real estate broker is not a financial services institution. Therefore, answer (a) is incorrect. Answers (c) and (d) are also wrong because regardless of the date of the appraisal, or the bank's confidence in the appraiser, the appraisal may not be used.

In which of the following situations does a bank need to post a branch closing notice? A. A bank closes a branch temporarily because of heavy hurricane damage. B. A bank closes a branch in a suburban neighborhood because business has not adequately developed there. C. A bank decides not to exercise its option to purchase a branch it has been temporarily running for the FDIC as a part of a purchase of a failed institution. D. A bank closes a branch and moves it 850 feet down the street

The correct answer is b. 12 USC 1831(r-1) Outline I A and B Temporary closings are not branch closings. Relocations of less than 1,000 feet are not branch closings. A decision not to exercise an option to retain a branch in an FDIC transaction is not a closing requiring the bank to send a notice.

Which of the following must be included in a branch closing notice to a bank's regulatory agency? A. Comments from customers who oppose the closing B. Detailed statement of the reasons for the closing C. Copy of the notice to be sent to affected customers D. Copy of board minutes reflecting the decision to close

The correct answer is b. 12 USC 1831(r-1)(b)(2)(A) Outline II A(2)(c)

A federal government agency may obtain customer financial records from a financial institution immediately if it presents which of the following to the financial institution? A. Written request B. Valid search warrant C. Certified bench warrant D. IRS administrative letter

The correct answer is b. 12 USC 3403(c) Outline II A(3) Of the alternatives, a valid search warrant is the only one by which the bank can immediately turn over the records requested.

John Downey has a mortgage at First National that is covered by the Homeowner's Protection Act of 1998. His loan has a fixed rate. On October 1, 2015, his loan will be half-way through its amortization schedule. If the loan still has PMI on it at that point, and his payments are current, what is First National's responsibility? A. The bank has no responsibility to do anything. B. The bank must terminate the PMI and notify the borrower. C. The bank must notify the borrower and give him a chance to request termination of the PMI. D. The bank must provide a new annual disclosure statement within 30 days.

The correct answer is b. 12 USC 4902 Outline II C The half-way point of the loan is the final termination date, and the bank must cancel the PMI.

Country A (a foreign country that is boycotting Country B, another foreign country) has ordered goods from ABC, a U.S. corporation. Country A has opened a letter of credit with Overseas, Inc., a foreign bank. The letter of credit specifies that ABC must certify that it does not do business with Country B. Overseas, Inc., sends a telegram to First National Bank, a U.S. bank, stating the major terms and conditions of the letter of credit and asking First National Bank to confirm the letter of credit. The telegram does not state the boycott provisions. Overseas mails the letter of credit to First National Bank and asks First National Bank to confirm it. What may First National Bank do? A. First National Bank must confirm it if it previously agreed to do so. B. First National Bank may advise ABC of the letter of credit and administer its disposal, but may not confirm it and must report it to the Department of Commerce and the IRS. C. First National Bank may do nothing but return the letter of credit to the issuing bank and report to the IRS. D. First National Bank must confirm the letter of credit but should also report it to the Department of Commerce.

The correct answer is b. 15 CFR 760.2(f) Outline I B(5) The bank may perform nothing but administerial actions with regard to the letter of credit—it may not confirm it. The bank should report the transaction to the Department of Commerce and the IRS.

Of the following actions, which one is NOT recommended by the OCC's advisory letter as a necessary tool of management oversight of insurance and annuity sales? A. Hiring competent personnel B. Establishing a separate insurance agency C. Auditing systems and controls D. Requiring a member of management to actively oversee this function

The correct answer is b. OCC Advisory Letter 96-8 Outline II B

First National Bank, a U.S. bank, is contacted by Manufacturing Company, Inc., a U.S. company, to finance its transaction with Country Z, a boycotting country. Payment will be made through a letter of credit in favor of Manufacturing Company at its U.S. address. First National Bank knows that the letter of credit will contain restrictive boycott conditions that would prevent the bank from implementing it. First National Bank suggests to Manufacturing Company, Inc., that it set up a shell corporation in Country Y, a nonboycotting country, and have the shell corporation be the beneficiary of the letter of credit. Does First National Bank have any problem with this transaction? A. No. The transaction is now not subject to Department of Commerce regulations because the beneficiary is not a U.S. company. B. Yes. The transaction is set up to evade the regulation and First National Bank is liable. C. No. The transaction is set up to evade the regulation, but First National Bank is not liable because Manufacturing Company, Inc., actually effected the transaction. D. No. First National should have Manufacturing Company, Inc., sign a statement accepting full responsibility for the establishment of the shell corporation.

The correct answer is b. 15 CFR 760.4(a) Outline I B(1)(g) and B(5)

A collector for First Collection Company, located in Chicago, makes calls to consumers all over the country. He is responsible for 50 past-due accounts. Each day he begins calling all his accounts on a rotating basis. What time constraints should he follow? A. He should not call consumers anywhere in the country before 8:00 a.m. Chicago time. B. He should not call any consumer before 8:00 a.m. at the consumer's location. C. He should not call any consumer before 9:00 a.m. at the consumer's location. D. He can use any time zone in the continental United States as the basis for the time restrictions, and he should not call any consumer before it is 8:00 a.m. in the chosen time zone.

The correct answer is b. 15 USC 1692c Outline II A(1)(a) The collector may contact a consumer only between the hours of 8:00 a.m. and 9:00 p.m., local time, at the consumer's location.

A collector at First Collection Company has not been able to reach John, a consumer, at home. The collector obtains John's work telephone number and calls him at work. John tells the collector not to call him at work again because personal calls are prohibited by his employer. What should the collector do? A. Tell John that he must provide such a prohibition in writing before it will be effective B. Refrain from calling John at work C. Tell John that calls to him at work will cease if he can be reached at another place D. Ask John to have his employer's representative call the collector to verify the statement

The correct answer is b. 15 USC 1692c Outline II A(1)(c) If a debt collector knows or has reason to know that a consumer's employer prohibits the consumer receiving communications from the collector at work, the collector must refrain from communicating with the consumer there. A clear statement from the consumer would give the collector the necessary knowledge that such communications are prohibited.

Which of the following is the correct response to consumer written requests that they not be contacted again by debt collectors? A. Collectors may send final demand letters. B. Collectors may send letters explaining that defaulted obligations are being turned over to attorneys for legal action. C. Collectors may call and ask for verification of requests to cease communications. D. Collectors may send letters that remind debtors of their legal obligations under the credit contracts.

The correct answer is b. 15 USC 1692c Outline II A(1)(d) There are only three types of communication that may be sent to a consumer who has given a written notice to a debt collector to cease communications: (1) that further collection efforts will cease; (2) that the collector may invoke a specific remedy ordinarily invoked by that collector; or (3) that the collector intends to invoke a specific remedy.

Which of the following actions is most likely to be prohibited under the Fair Debt Collection Practices Act? A. Pursuant to a corporate policy, individual collectors using an alias when contacting consumers B. Calling a consumer's neighbors to leave messages when the consumer has a telephone C. Telling a consumer that a lawsuit would cause the consumer inconvenience and embarrassment D. Referring to the fact that a consumer could be subjected to criminal prosecution for issuing bad checks

The correct answer is b. 15 USC 1692d Outline II A(2) A collector cannot make unnecessary calls to third parties. Calling a consumer's neighbor and leaving messages when the consumer has a telephone is considered to be harassment. Although a collector may not fail to meaningfully disclose his or her identity, the use of personal aliases as a corporate policy is acceptable provided the collector is not using a false name for the business. Also, stating that a lawsuit will cause embarrassment and inconvenience is not false or misleading. Properly making a reference to criminal prosecution of issuing a bad check is also not abusive provided the offense is one that can be subject to such prosecution.

Which of the following communications would NOT be considered a deceptive communication under the Fair Debt Collection Practices Act? A. Reporting a disputed debt to a credit bureau without reporting it as disputed B. Giving the consumer a disclosure that this is an attempt to collect a debt and any information used will be used for that purpose C. Sending the consumer a letter that appears to be a telegram from a debt collection service regarding his or her thirty-day-past-due account that requests payment D. Sending the consumer a letter stating that the account will be sent to an attorney for legal action within 10 days, when no such action is actually intended

The correct answer is b. 15 USC 1692e Outline II A(4) A collector must send notice that a debt is disputed at the time of the report. The collector must disclose in the first communication that the debt collector is trying to collect a debt. Using communication formats that misrepresent the nature of the message or convey a false sense of urgency is an abusive practice. Stating that certain remedies will be taken when there is no present intention to do so is a violation of the act.

Which of the following actions of Sales, Inc., a U.S. based corporation, appears to be illegal with NO affirmative defense available under the FCPA? A. Sales, Inc. pays a fee to the government of a foreign country to obtain a sales and distribution license in the country B. Sales, Inc. pays a commission to the chief customs officer of the foreign country based on the amount of gross sales each month C. Sales, Inc. pays a fee that is authorized under the laws of the country, to the chief customs official of the foreign country for consulting with the company on compliance with the customs laws D. Sales, Inc. pays a transportation tax to a foreign government official for the purpose of transporting its product throughout the country

The correct answer is b. 15 USC 78dd-1(c) Outline II E There is no law authorizing this fee. A law authorizing the fee is an affirmative defense.

ABC Bank hired Acme Marketing Company to conduct telemarketing calls on its behalf. The bank asked Acme to market its various deposit account services. Which of the following statements is FALSE? A. Acme can call any of the bank's current customers without their consent. B. Acme must check the FTC Do-Not-Call list before calling the bank's current customers. C. Acme must follow the abandonment rules on every call it makes for the bank. D. Acme must maintain records of its employees who make the calls.

The correct answer is b. 16 CFR 310.4(b)(1)(iii)(B)(ii) Outline II C(2)(a)(iii) If Acme is using the bank's established customers, it does not have to check the Do-Not-Call list.

Jayne Logan, a loan officer at State National Bank, has recently recruited Mr. David Roberts as a new loan customer. She has known Mr. Roberts for 10 years and handled his lending transactions at another bank where she previously worked. As his first transaction with State National Bank, Mr. Roberts pledges stock that is traded on the NYSE. The stock is received directly from Mr. Roberts, who has his secretary personally deliver it to the bank. Is the bank required, in this instance, to send a lost or stolen securities inquiry regarding the stock? Why or why not? A. No. Because Ms. Logan has known Mr. Roberts for more than five years, no inquiry must be sent. B. Yes. Because Mr. Roberts is a new customer to the bank, the inquiry must be sent. C. No. Because Mr. Roberts' secretary personally delivered the stock certificates, no inquiry must be sent. D. Yes. All stock pledged against a loan that is traded on the NYSE must have an inquiry sent.

The correct answer is b. 17 CFR 240.17f-1(a) and (d) Outline III C Transactions like this one must have inquiries sent to the SIC because Mr. Roberts is a new customer. The bank has not had any previous securities-related transactions with Mr. Roberts.

How long after discovery does a bank have to report any lost or missing securities when criminal activity is suspected? A. 90 calendar days B. 1 business day C. Never. Law enforcement must report D. 10 business days

The correct answer is b. 17 CFR 240.17f-1(c) Outline II.A.1. The bank has one business day to report any lost or missing securities when criminal activity is suspected.

Which of the following entities is exempt from the requirements of the Government Securities Act? A. A bank that operates a securities underwriting department to provide underwriting services to issuers of government securities B. A national bank that purchases and sells government securities only in its fiduciary capacity on behalf of clients in its trust department C. A bank that operates a financial advisory service that provides advice to clients on the purchase and sale of government securities D. A bank that operates an investment department to provide investment advice and purchase and sell all types of securities (including government securities) for clients

The correct answer is b. 17 CFR 400.3(c)(3) Outline I B The national bank that purchases and sells government securities only in its fiduciary capacity to trust department clients is not considered to be an associated person, and therefore is exempt from the requirements of the Government Securities Act.

Under what circumstances will a G-FINW (a withdrawal as a government securities dealer) become effective in less than 60 days? A. If the bank requests a shorter time period B. If the regulatory agency determines that a shorter time period would be appropriate C. If the bank ceases doing business as a securities dealer D. If the bank has no employees that qualify as associated persons

The correct answer is b. 17 CFR 400.6(b) Outline III B

When is it possible for a bank to be exempted from compliance with some of the Government Securities Act custodial regulations? A. When the bank maintains its securities in the ordinary course of business B. When the bank has procedures in place to make sure it complies with the custodial regulations of its federal regulatory agency C. When the bank does not hold itself out as a government securities broker or dealer D. When the bank uses more than the normal standard of care when maintaining possession and control of securities

The correct answer is b. 17 CFR 450.3 Outline VII A A financial institution that is regulated by a federal agency and has policies and procedures in place to ensure that the agency's regulations are followed regarding custody of securities may be exempted from a portion of the custodial requirements of the Government Securities Act. A bank that does not hold itself out as a government securities dealer and that does not actively solicit government securities business may be exempt from registration requirements but is still covered by custodial requirements.

When does a gift accepted by a banker clearly violate the Bank Bribery Act? A. When it is given for personal reasons B. When it is given with corrupt intent C. When it is valued at a dollar amount exceeding $50 D. When it is not given in connection with a generally accepted holiday

The correct answer is b. 18 USC section 215(a), Outline I A(1) In some circumstances gifts may be given for personal reasons (based on family or social relationships), and they may be given at other times than holidays. In some cases the gift may have a value greater than $50. However, if the gift is given with corrupt intent, it will violate the Bank Bribery Act.

For purposes of insider lending laws and regulations, what is the definition of the term executive officer? A. All bank officers at or above the level of executive vice president B. Anyone who has the authority to participate in major policymaking functions at the bank C. Anyone who has the authority to participate in lending decisions at the bank D. All bank officers at or above the level of assistant vice president

The correct answer is b. 2 CFR 215.2(e) Outline I A This definition is not limited to employees. Anyone who participates in such policymaking functions is covered, even someone not paid a salary by the bank

Title Co., Inc., has a business relationship with First National Bank in that Title Co. keeps a large certificate of deposit at the bank at an interest rate substantially below the market rate. In return, the bank refers to Title Co. its mortgage loan borrowers for settlement services and to purchase required title insurance. Title Co.'s rates are very competitive. If the bank discloses the relationship to the borrower, is this arrangement legal under RESPA? A. Yes. Borrowers would pay the same price for title insurance and settlement at another title company anyway. B. No. The bank is receiving value in the below-market-rate CD, essentially a referral fee for settlement services. Incorrect C. Yes. The bank discloses the relationship on the Good Faith Estimate. D. No. The bank cannot require title insurance on mortgage loans

The correct answer is b. 2412 USC 2601.8(a); 12 CFR 1024.14(a), (b), and (d) Outline II C(1)

ABC Co. signed a contract to export goods to Country M, a boycotting country. Payment will be made by a letter of credit confirmed by First National Bank. The letter of credit requires ABC Co. to certify that none of its directors are nationals of any country boycotted by Country M before ABC can be paid. First National Bank confirms the letter of credit to ABC after determining that all of the documents are in order. Did First National Bank participate in a boycott, and must the bank report the action to the IRS? A. No. The bank's action was only ministerial. B. Yes. The action was participation in a boycott and the bank must report the action to the IRS. C. No. Only ABC Co. is required to report to the IRS. D. Yes, but no reporting requirements were triggered.

The correct answer is b. 26 USC 999(a) and (b)(3) Outline II A(2) and B The correct answer is b. 26 USC 999(a) and (b)(3) Outline II A(2) and B

First National Bank advises Country A, a boycotting country, on various U.S. investments. Country A instructs First National Bank not to recommend for investment any shares of certain blacklisted companies. First National Bank follows this instruction. Has First National Bank participated or cooperated in an international boycott under the IRS regulations by this action? A. Yes. The companies are the subject of a boycott. B. No. The bank may agree not to recommend certain companies. C. Yes, if the companies are part of a boycott. D. No, but the bank must report this action to the IRS.

The correct answer is b. 26 USC 999(b)(3) Outline II A(2)

Which of the following activities is permitted under ADA? A. Issuing a policy against making loans to health care providers who regularly work with infectious patients B. Prohibiting smoking anywhere in the bank building C. Providing readers to visually impaired loan applicants for a $15 fee D. Requiring disabled depositors to use a teller window that is specially constructed for the use of disabled persons

The correct answer is b. 28 CFR 36 and 238 CFR 210 Outline III B(2), (4), (6), and (9) The bank cannot discriminate against persons who regularly associate with persons with disabilities. It also cannot charge for auxiliary devices that are used as a reasonable accommodation. Therefore, it cannot charge for the readers. The bank may not force a disabled person to use a segregated service, such as a special teller window. If the disabled person wants to use the regular window, the bank must allow him or her to do so. The bank may prohibit smoking within the building.

The mortgage lending department of Bank XYZ received some inquiries from potential applicants who are visually impaired. The bank would like to comply with ADA concerning these potential applicants, but it does not want to spend a significant amount of money. Which of the following statements is true? A. The bank must have its loan application and disclosures translated into Braille. B. The bank may have a loan assistant read each loan application and disclosure document to the applicant and assist in completion of the forms. C. The bank may require the applicant to bring a sighted friend or relative to the bank to assist in completing the application. D. The bank may make a policy not to lend money to blind persons.

The correct answer is b. 28 CFR 36.303 Outline III B(9)(a) Although the bank may have its documents translated into Braille, it is not required to do so. The bank cannot require that the applicant bring a nondisabled friend, and it cannot make a policy that blatantly discriminates against a class of disabled persons.

Under the ADA, what can an employer do? A. Inquire about a disability if the disability is obvious to the interviewer at the time of the job interview B. Inquire about a disability when offering a job provided the disability is related to the job requirements C. Refuse to make an accommodation for a disability if 50 persons or fewer are employed D. Note the disability in the employee's file so that other managers will be aware of it when interviewing the employee for future position changes

The correct answer is b. 29 CFR 1630.13 Outline II B(5) The employer may inquire about a disability that is related to the job function. If necessary, the employer must provide a reasonable accommodation so that the employee can perform the necessary job functions

The Bank received a notice of garnishment on John Doe's account. There is a balance of $530 on the date the notice was received. Two weeks prior to the receipt of the notice, a direct deposit of $750 was deposited into Mr. Doe's account representing his monthly benefit from the Social Security Administration. Which of the following actions is now permissible for the bank? A. Follow its normal garnishment procedures B. Process Mr. Doe's pending insurance ACH payment C. Assess its normal $25 garnishment fee D. Transfer the account balance to a holding account pending the garnishment resolution

The correct answer is b. 31 CFR 212.6 Outline II D(2) Since the amount in Mr. Doe's account is protected (it's less than a benefit payment made within 2 months of the receipt of the garnishment order) he must be allowed full access to the funds.

When conducting a records search pursuant to a FinCEN request, what must a bank search? A. All customer records from the previous five years B. All accounts maintained within the previous 12 months and transaction records for 6 months C. Only records that can be electronically searched D. Nothing; searches are voluntary

The correct answer is b. 31 CFR Chapter X 1010.520(b) Outline IX A(2)(b) The bank is required to search all current accounts and all records maintained in the last 12 months.

Fastfood, Inc., a nationwide restaurant chain, opened an account at First National Bank last year. Fastfood is making daily cash deposits in amounts of $15,000 to $20,000. First National needs to determine if this company is an exempt person. What should the bank do first? A. Because the restaurant is an established depositor, the bank should provide an unlimited exemption for cash deposits and withdrawals. B. The bank should look in the newspaper or on the Internet to determine if Fastfood, Inc.'s, stock appears on one of the listed exchanges. C. The bank should ask the company if it qualifies as a listed business. D. The bank should perform a corporate records check to determine if the company is chartered in the United States.

The correct answer is b. 31 CFR Chapter X 1020.315(e)(iii) Outline III B(2) and (4)(c) The bank is responsible for determining whether the company is a listed business. The bank may rely on a general circulation newspaper or an Internet Web site operated by one of the major exchanges.

By which date must an interest reporting statement be sent to the borrowers last known address? A. January 15 of the year following the year the interest is paid B. January 31 of the year following the year the interest is paid C. February 28 of the year following the year the interest is paid D. March 1 of the year following the year the interest is paid

The correct answer is b. Treas. Reg. Section 1.6050H-2(b)(6) Outline I D

In which of the following circumstances is First National Bank MOST LIKELY to be covered by the HITECH regulations? A. The bank opens a payroll account for a local hospital B. The bank processes a lock box account for a medical clinic primarily consisting of patient payments C. The bank makes a loan to a group of doctors to purchase office equipment, secured by the equipment D. A medical equipment vendor opens a checking account at the bank

The correct answer is b. 45 CFR 160.103 Outline I E(2) Of all of the circumstances described, the bank is most likely to have access to patient information when processing payments that are paying for medical services. The opening of deposit accounts and making loans to customers related to the medical field does not bring the bank under the authority of the HITECH Act.

ABC Bank's call center uses free time to call its customers and former customers to inform them of bank promotions. ABC does not want to purchase the national Do-Not-Call list due to the expense involved. What must ABC do to avoid the requirement to purchase this list? A. Establish written policies and train its personnel B. Call only customers with whom it has a business relationship C. Make sure it follows the recorded call rules D. Nothing, banks are exempt from the requirement to check the list

The correct answer is b. 47 CFR 64.1200(c)(2)(ii) Outline I B(9)(b) The bank must follow all of the Do-Not-Call requirements (purchase the list, keep it updated, and so forth) if it plans to call anyone with whom it does not have an established business relationship

Martina Ruiz has an individual car loan at the bank. She makes monthly payments of $525 and has three years left on the term. She informs the bank that her husband's U.S. Navy Reserve unit has been activated, and he will be gone for an indefinite period of time. His annual income will now be much less than it was previously. Ms. Ruiz asks the bank to lower the interest rate on this loan to six percent and lower the payments accordingly. Does the bank have to comply with this request? A. Yes. If Ms. Ruiz can prove that her husband's military service materially affects her ability to repay the loan, the bank must lower the interest rate and the payments. B. No. Unless Ms. Ruiz herself is undertaking military service, the bank is not under any obligation to make an accommodation on the payments. C. Yes, but only if Ms. Ruiz agrees not to drive the car during the duration of her husband's military service. D. No. Unless her husband makes the request, the bank does not have to comply.

The correct answer is b. 50 USC Appendix 527 Outline I B(1)(c) The interest rate cap is a protection extended only to loans made by the servicemember or jointly by the servicemember and spouse. In this case the loan is made only to the spouse.

Eleanor Mumford is an advertising account executive. She is also a pilot in the Air Force reserve. She has a car loan with a five-year term at a nine percent interest rate and a credit card with a $5,000 balance at 12 percent annual interest. Her unit has been activated, and she will be leaving for military service. Her military pay will be less than half her civilian pay. She writes to the bank and asks that the bank lower her interest rates on the credit card and car loan for the duration of her service to six percent. She asks for her monthly car payment to be lowered also. She sends along proof of her activation and military pay scale. What does the bank have to do? A. The bank must lower the credit card and car loan interest rates but does not have to lower the car payments. B. The bank must lower both rates, and the car payment must be lowered to account for the new interest rate. C. The bank has to lower only the credit card interest rate. D. The bank does not have to do either.

The correct answer is b. 50 USC Appendix Section 527 Outline I B(1)(c) The SCRA rate cap provision covers these debts because Eleanor entered into both of them before her military service. The bank also is required to lower her payments to account for the forgiven interest. The bank has the option of asking a court to give it some protection from this request, but if Eleanor's income is substantially reduced by her military service, the court will not protect the bank from this request.

Robin Myers defaulted on her car loan at the bank. The bank sent several reminder letters and, finally, a demand for payment. The last letter said that if she did not pay, the bank would repossess the car. Before its repossession Robin joined the Marines. She sent the bank a notice that she was now in active military duty and asked the bank to forebear taking any further action against the collateral. What can the bank do? A. Proceed with self-help repossession of the vehicle since she had already been notified of the default before joining the service. B. File a petition with a court of competent jurisdiction and ask for permission to repossess the car. C. Ask Robin's commanding officer for permission to repossess the car. D. Repossess the car but don't sell it until Robin's military service is over.

The correct answer is b. 50 USC Appendix Sections 523-534 Outline I B(2) and C The bank's only alternative, other than to do nothing, is to ask a court for permission to allow the bank to repossess the vehicle. The court will have to consider whether Robin's rights can be adequately protected in light of her military service and may not allow the bank to gain possession of the vehicle. However, the bank should consider reputation risk before taking any action.

Your bank's president comes back from an industry conference and tells the compliance officer that she attended a presentation about OFAC. She heard the bank could be fined for not adhering to OFAC requirements. Thus, she has directed that every bank transaction be reviewed for OFAC compliance. What is the most appropriate statement the compliance officer could make to the bank president? A. The bank is already in compliance because OFAC checks are performed on all new depositors B. The bank has assessed its OFAC risk and has implemented risk-based OFAC procedures C. OFAC does not apply because the bank does not conduct business in foreign countries or with foreign nationals D. Banks are usually not fined for OFAC violations unless they conduct transactions with SDNs or blocked countries

The correct answer is b. A risk-based program is required by the BSA/AML interagency manual

Taking advantage of a consumer's inability to understand the terms or conditions of a financial services product would be considered: A. Deceptive B. Abusive C. Unfair D. Unproductive

The correct answer is b. Abusive 12 USC 5531(d) Outline: I (A)(3)(b)

Which of the following features is acceptable in a high-cost mortgage loan? A. A late fee constituting five percent of the amount past due B. A payment schedule that allows for negative amortizations C. A prepayment payment penalty provision effective for the first year of the loan D. An unconditional demand clause

The correct answer is c. 12 CFR 1026.32(d)(1)-(6) and 12 CFR 1026.34(a)(8) Outline VII B(4)(g) Prepayment penalties are acceptable as long as they are limited to the first 36 months of the loan.

A bank is planning to sell eight branches. The compliance officer participates on a bank committee to oversee the process. What should be the compliance officer's PRIMARY concern? A. That the bank's revenues will not be affected severely B. That the branches are closed in accordance with bank policy C. That customers of the branches will continue to have access to banking services D. That the bank's confidential information is returned to the main office

The correct answer is b. Although all of the reasons given are important considerations at some time when deciding to close branches, the primary compliance concern is whether the branches are closed in accordance with the branch closing policy. The other considerations such as whether the customers will have access to banking services and how the bank's revenues will be affected should be considerations before deciding to close the branches. Once the decision is made, the most important concern is compliance with the branch closing policy.

ACME Bank is a state nonmember bank with all of its offices in one state. However, it also has an Internet Web site where it advertises consumer credit and accepts applications from a five-state regional area. Two of the states are community property states. The other three are not. What is the best explanation for what ACME bank's management should do to comply with the FDIC ECOA spousal signature guidance? A. Because ACME has all of its offices within one state, it only has to be knowledgeable of the legal requirements of that state regarding spousal property rights and can apply those laws to all of its operations. B. ACME must become familiar with the laws of each of the five states and ask for spouse signatures only when appropriate under the law. C. ACME can choose any of the state laws where it operates to apply to its consumer lending operations. D. ACME should make only business-purpose loans to avoid the spousal signature rules.

The correct answer is b. FDIC Guidance on Spousal Signature Requirements Outline II D(2)(f)(i)(b)

Consumer reports used for credit transactions may contain which of the following items? A. Records of bankruptcies for seven years B. Adverse credit items for seven years and bankruptcies for 10 years C. Records of arrests or convictions for 10 years D. Paid tax liens for 10 years

The correct answer is b. Fair Credit Reporting Act, Section 605(a) and 15 USC CH 41 1681c Outline I C Bankruptcies can be reported for 10 years. All other adverse items may be reported for 7 years.

Which of the following would NOT be acceptable under the Bank Bribery Act and the relevant guidelines? A. A luncheon paid for by a bank customer after a transaction is closed B. A gift of a hunting rifle to a loan officer from a borrower at Christmas C. The gift of a gold watch to a loan officer from a customer who is the loan officer's cousin D. An award of a writing pen and pencil set to a bank officer by a civic organization

The correct answer is b. Federal agency guidelines Outline I A and II A(4) While Christmas gifts of modest value do not violate the statute, the hunting rifle is probably too expensive to qualify. The other gifts are related to business transactions or family ties or are specifically approved in the guidelines.

Harvey Smith is a loan officer at First National Bank. Which of the following of Harvey's outside business interests may be considered to be a conflict of interest that should be disclosed to the bank? A. His ownership of 4,000 shares of stock in a local car dealership (the car dealership is not a bank customer) B. His wife's position as chair of the board of a local bank C. His attendance at a party hosted by one of his customers where other financial institutions were represented D. His role as honorary chair of a fund drive for a local charitable organization

The correct answer is b. Federal agency guidelines Outline II A(6) In her position, Harvey's wife has access to confidential information about her bank, a competitor with First National. Harvey also has a certain amount of access to bank information. Therefore, this personal relationship involves a potential conflict of interest, which should be disclosed to the bank.

Which of the following is NOT a written record the bank should retain in complying with the Bank Bribery Act? A. A copy of the bank's internal code of conduct B. A list of all gifts received by bank officers during the year C. Disclosures of unauthorized gifts D. A list of all bank officers' outside business interests

The correct answer is b. Federal agency guidelines, Outline II B and C The bank is to keep copies of its own code of conduct, a list of outside business interests, and a record of disclosures of unauthorized gifts.

Which of the following is NOT considered an acceptable form of identification for an individual when completing a CTR? A. U.S. passport B. Long-term deposit account relationship C. State-issued photo identification (e.g., driver's license) D. Photo identification card issued by a local government agency

The correct answer is b. Form 104 (CTR) Instructions Outline III A(2) Only official documents can be used for identification.

First National Bank receives a notice from the IRS to begin withholding 28 percent of the interest payments on the money market savings account of Myra Wilcox because of payee underreporting. What is the most proper action for First National Bank to take? A. Send a notice to Ms. Wilcox within 15 days of the receipt of the IRS notice and begin withholding; stop withholding if Ms. Wilcox can prove to the bank that she is not underreporting B. Begin withholding and send a notice to Ms. Wilcox within 15 days of beginning the withholding; stop withholding only on written notice from the IRS C. Begin withholding with the first payment after 30 days and send a notice to Ms. Wilcox at least 15 days before the first payment from which funds are to be withheld; stop withholding only on written notice from the IRS D. Send notice to Ms. Wilcox within 15 days of the receipt of the IRS notice and begin backup withholding with the first payment following 30 days after the notice; stop withholding only on written notice from the IRS

The correct answer is b. IRC Section 3406 Outline III C The bank must begin to backup withhold. Notice must be sent to Ms. Wilcox by 15 business days after the date of the first payment subject to withholding. The bank cannot stop withholding until it or Ms. Wilcox receives notice from the IRS that withholding can stop.

When a bank makes a rescindable closed-end home improvement loan to a consumer, to which of the following may the bank advance funds before the end of the rescission period? A. To the borrower B. To the contractor for delivery of materials C. To an escrow account with a third-party escrow agent D. To an escrow account with the borrower acting as the escrow agent

The correct answer is c. 12 CFR 1026.23(c) and Commentary Outline IV D(5)(i) Until the rescission period has expired and the creditor is reasonably certain that the consumer has not exercised his right to rescind, the creditor may not disburse any loan proceeds except into escrow. The escrow agent or trustee on the escrow account cannot be the consumer.

Walter Johnson has two accounts at First National Bank. His savings account was opened in 1975, and his money market savings account was opened in 1985. He has never supplied a TIN number to the bank. What must First National Bank do? A. Withhold 28 percent of the payments on each of the accounts B. Withhold 28 percent of the payments on each account and annually request a TIN on the savings account C. Annually request a TIN on both accounts D. Refuse to open future accounts without a TIN

The correct answer is b. IRC Section 3406 Outline III C(8) For accounts that were opened before 1984, the bank must annually request a TIN. On accounts opened after 1984, the bank should simply begin backup withholding if not provided a TIN at the time the account is open.

On March 1, First National Bank opened three accounts: 1) a savings account for Margaret Nelson, who did not have a TIN but signed a certification that she had applied for one; 2) a money market savings account for Linda Miller, who could not remember her TIN but promised to provide it at the earliest possible date; and 3) a certificate of deposit for John Whiteside, who completed a Form W-9 but provided a TIN with only eight numbers. Ms. Nelson provided her newly acquired TIN to the bank on April 15, Ms. Miller provided her TIN on April 5, and Mr. Whiteside provided his TIN to the bank on March 10. Interest was paid on all of these accounts on March 31, and the bank withheld 28 percent of the interest payments. On April 20 all the payees requested that the withheld interest be refunded. What should the bank do? A. Refund the withheld interest to all payees B. Refund to Ms. Nelson and Mr. Whiteside because the interest was erroneously withheld C. Refund only to Mr. Whiteside because the interest was erroneously withheld D. Refund only to Ms. Nelson because the interest was erroneously withheld

The correct answer is b. IRC Section 3406 Outline III C(7) and (9) A refund of the tax withheld can be made only before the end of the calendar year and before the return has been submitted to the IRS. Refunds can be made only if the interest has been withheld in error by the payor. Because the bank had the TIN before the payment of the interest in Mr. Whiteside's case, the interest was erroneously withheld. Ms. Nelson has 60 days to provide the TIN to the bank.

By what date must the bank send the borrower a statement in connection with an information return on foreclosed or abandoned property? A. January 15 of the year following the year of the foreclosure or abandonment B. January 31 of the year following the year of the foreclosure or abandonment C. February 28 of the year following the year of the foreclosure or abandonment D. March 1 of the year following the year of the foreclosure or abandonment

The correct answer is b. IRC Section 6050J(e) Outline II E

The senior lender at ABC bank would like to make stated income mortgage loans (i.e., loans where the bank does not verify the applicant's income) to mortgage customers, including subprime borrowers. Under the statement on subprime mortgage lending, which of the following is the best statement of the bank's responsibility regarding this new program? A. Due to the risks, it should not implement such a program for subprime borrowers B. The bank should make a policy for this program that includes mitigating factors for the risks C. The bank should set stringent debt-to-income ratios for these loans D. The bank should establish workout procedures for such loans in advance of making them.

The correct answer is b. Interagency Statement on Subprime Mortgage Lending Outline VI C(2)(g)

According to the 2007 interagency statement on subprime mortgage lending, what should an institution offering mortgage loans to subprime borrowers provide before submission of an application? A. Information on local residential real property values B. Payment shock information C. Truth in Lending disclosures D. Initial escrow statements

The correct answer is b. Interagency Statement on Subprime Mortgage Lending Outline VI E(5)(a)

. Which of the following is a key to the "unfairness" standard in UDAAP? A. The term or condition involved must be material to the consumer B. It must cause substantial injury C. It must take advantage of the reasonable consumer D. It must be published in print or digital form

The correct answer is b. It must cause substantial injury 15 USC 45(a)(4)(a) Outline A(1)(a)(i) An act can be unfair if it causes substantial injury, meaning a small injury to many consumers or a large injury to a few consumers.

Bank C is a $250 million bank in a large city. Recently the compliance officer of Bank C performed a review of consumer loans made during the previous 12 months. She also reviewed adverse action notices generated during the same period. She compared denied applications for persons with Hispanic surnames to loans made to persons without Hispanic surnames. She noted that in some cases the credit histories of loans on the books were similar to those of applicants denied for delinquent credit. What should be a concern for this compliance officer? A. That there were too many loan applications denied B. That the bank is engaging in disparate treatment C. That the bank's practices are having a disparate impact on the community D. That the bank's credit standards are too vague

The correct answer is b. Joint Policy Statement on Lending Discrimination Outline II B When there is no other explanation for the treatment of credit applicants except a prohibited basis, then the bank could be engaging in disparate treatment.

In which of the following activities may a bank engage and NOT be considered a municipal securities dealer? A. Underwriting municipal securities B. Buying securities for the bank's own account C. Providing advice to customers regarding the purchase of municipal securities D. Engaging in research and giving investment advice regarding municipal securities

The correct answer is b. MSRB Rule G-1 Outline I B

First National Bank is a municipal securities dealer. Its municipal securities department is supervised by Mary Watkins, a municipal securities principal. The department has five other employees, including two municipal securities representatives. Martin Wells, a commercial loan customer of the bank, tells Ms. Watkins he wants to invest in municipal securities and asks for her help. Mr. Wells has never dealt with the municipal securities department of the bank and has never purchased municipal securities. He wants to purchase the securities today. What should Ms. Watkins do? A. Determine what he would like to buy and help him buy it B. Help him make the purchase only if she can be assured the transaction meets the MSRB suitability requirements C. Help him make the purchase but avoid making any recommendations or comments about the advisability of the transaction D. Refer him to a municipal securities representative

The correct answer is b. MSRB Rule G-19 Outline II K Ms. Watkins should make sure she can get enough financial information from the customer before she proceeds with the transaction.

The BSA officer has just been notified by the chief operations officer that, due to a glitch in the bank's OFAC interdiction software, wires have been regularly transmitted to a bank on the SDN list. Based on the OFAC Enforcement Guidance, what should the BSA Officer do FIRST to attempt to mitigate any penalties? A. Review the OFAC wire policies and procedures to determine how the errors occurred B. Stop and hold all wires to the bank on the SDN list C. Investigate the customer who sends these wires D. Self-report the activity to OFAC

The correct answer is b. OFAC Enforcement Guidance (31 CFR 501) Appendix A Outline VII A-3 While all of these actions are important and should be undertaken, stopping the conduct should be done immediately

What is a key risk mitigation technique when offering RDC options to customers? A. Risk Assessment B. Customer Due Diligence C. Contracts & Agreements D. Vendor Due Diligence

The correct answer is b. Outline I (D)(1)(a) Determination of the suitability of the customer to include the type of business, geographic location, customer base and risk management process along with standard BSA/AML customer due diligence will mitigate higher levels of risk with the RDC delivery channel.

What should a bank do when it receives a request from a customer to transfer funds to an individual in Iraq? A. Conduct the transfer as requested B. Conduct the transfer if the individual and the financial institution are not on the SDN list C. Block the transfer D. Conduct the transfer and then notify OFAC immediately

The correct answer is b. Outline I and II The bank must check the person and the financial institution receiving the funds. If neither is an SDN, the transfer can be made.

Legislation was recently enacted to reform consumer real estate protection laws, and the bank will now have to change the way it documents, discloses, and advertises real estate loans, an integral product line at your bank. What should the compliance professional do FIRST to implement the new law within the bank? A. Read the law and write a new real estate compliance policy B. Form a task force of the business unit managers whose departments will be affected by the law to collectively form an action plan C. Talk to the bank president about the need for more resources in compliance D. Sign up all bank personnel affected by the changes for a seminar on the new law

The correct answer is b. Outline II B(3)(b) When implementing new rules, it is beneficial to start with a task force of affected managers that can make decisions about how to implement the new rule. The other actions would eventually become necessary, but it would be timelier to write the new policy and then develop training only after the compliance professional has a clearer idea of needed actions. Talking to the bank president about resources would not be helpful to implementing new legislation, unless it can be shown as necessary to complying as the business units have chosen.

Which state receives the reporting and escheatment of unclaimed property? A. The state where the bank is domiciled, if different from the bank holding company B. The state of the customer's last known address, if available and not foreign C. The state where the property is located, if a deposit account D. The state chosen by a bank holding company, if a multistate operation

The correct answer is b. Outline II D(1)

Which of the following is NOT a requirement of the Interagency Statement on Retail Sales of Nondeposit Investments? A. That employees selling nondeposit investments receive special training on the products they sell B. That all bank employees receive special training on the nondeposit investment products sold by the bank C. That employees selling nondeposit investments ensure that the product is suitable to the customer purchasing it D. That the history of employees selling nondeposit investments be checked before their employment

The correct answer is b. Outline Interagency Statement II B(5) This is the only answer not required by the policy statement.

ACME Bank is a $600 million institution with 15 branches within three counties. Because of its proximity to Mexico, the bank has many foreign national customers and makes many foreign wire transfers for its customers. Currently the bank's branch managers print the OFAC list of SDNs and place them in strategic places in each branch. The wire transfer department keeps its own copy of the list. The compliance officer has implemented an annual auditing program to check the bank's compliance with OFAC regulations. The findings of this audit are provided to the bank's board of directors annually. The bank's regulatory agency has indicated to management that the bank has a high risk for BSA/AML/OFAC compliance. Of the following actions, which would be the most effective to strengthen the bank's OFAC compliance? A. Conduct compliance audits twice a year B. Purchase and implement interdiction software for the wire transfer area C. As an internal control procedure, require the BSA officer to check the OFAC Web site daily for any changes to the SDN list D. Routinely provide account transaction information to federal security agencies so suspicious patterns can be detected

The correct answer is b. Outline V OFAC's Foreign Assets Control Regulations for the Financial Community The bank should conduct regular OFAC training for all employees and maintain internal control procedures. It is not necessary to audit compliance with OFAC regulations more often than once a year, but in a bank of this size with the level of risk involved, the bank should invest in interdiction software for at least the wire transfer area and preferably for all operational areas.

In a review of a bank's compliance with the Regulation O overdraft provisions, what should the compliance officer do? A. Identify the related interests of all directors, executive officers, and principal shareholders B. Examine the bank's overdraft reports for a selected time period C. Examine the annual FFIEC-004 reports on indebtedness to correspondent banks D. Examine the bank's latest report of condition and income

The correct answer is b. The best way to evaluate the bank's compliance with the overdraft provisions of Regulation O is to review the bank's overdraft reports for a time period and determine whether any insider accounts are overdrawn

Mr. Roberts has three loans at First National Bank: Loan A made to purchase a car, secured by the car; Loan B made to purchase stock, secured by a lake lot; and Loan C made to pay taxes, secured by a rental house he owns. Last year he paid $2,500 in interest on Loan A; $550 in interest on Loan B; and $1,000 in interest on Loan C. How much interest will First National Bank report to the IRS? A. $4,050 B. $1,000 C. $1,550 D. $2,500

The correct answer is b. Treas. Reg. Section 1.6050H-1(e)(1) Outline I B and C The requirement to report is on a mortgage-by-mortgage basis. Therefore, although the loan secured by the lake lot is a mortgage loan for purposes of the mortgage interest reporting regulation, not enough interest was collected to meet the $600 threshold requirement. The interest from the two loans that meet the definition of a mortgage (Loans B and C) should not be aggregated for reporting purposes.

First National Bank made a loan to Lawrence & Co. for the purpose of purchasing landscape equipment, secured by a storage lot the company owned. The borrower made payments for a year and then defaulted. Three months passed without any communication or payments from the borrower, despite the banks efforts to locate the companys owners. The company appears to have ceased operations. What is the banks BEST course of action? A. Do nothing, because the bank has no actual knowledge of abandonment and has not foreclosed on the property B. Make reasonable inquiries to determine whether the property is abandoned and if so, report it as abandoned C. Locate the borrower, foreclose on the property, and report the transaction as a foreclosure D. Report the property as abandoned

The correct answer is b. Treas. Reg. Section 1.6050J-1T A-19 Outline II C

What may a creditor do when furnishing credit information? A. May designate accounts in any manner that is convenient and reasonable B. Must designate accounts as specified by the parties C. Must designate accounts to show participation by both spouses if both are liable D. Must designate accounts to show all parties, including guarantors

The correct answer is c. 12 CFR 1002.10(a)(1) Outline II H(1)(a) A creditor must designate accounts to show participation by all liable parties except that guarantors do not have to be designated.

Which of the following describes the record retention requirements under Regulation B for a credit application from a business with annual gross revenues in excess of $1,000,000? A. The bank must retain records for 30 days; however, if a written statement of action is requested, the bank must retain the records for 90 days. B. After 6 months, the bank must dispose of the applications and records in accordance with waste disposal rules promulgated by the EPA. C. The bank must retain records for 12 months if a written statement of adverse action is requested within 60 days after notifying the applicant of the action taken. D. The bank must retain records for 25 months from the date of application.

The correct answer is c. 12 CFR 1002.12(b)(5) Outline II J (3)(d) This shorter record retention is required only for business purpose applicants.

Which of the following actions is NOT an adverse action? A. Refusal to grant credit on substantially the same terms and conditions as requested by the applicant B. Termination of an account Correct C. Refusal to grant credit on the grounds that the lender does not offer the type of credit requested D. Refusal to increase the amount of credit on an existing account after a request

The correct answer is c. 12 CFR 1002.2(c)(2)(v) Outline II F(1)(b)(v) If the creditor does not offer the type of credit requested by the applicant, the denial of the request is not an adverse action.

Robin Martin made an individual application to the bank for a car loan. She has just returned to work on a regular basis because she was a full-time homemaker until recently, when her last child entered school. The loan officer would like to ask her about her husband. Under what circumstances can the officer ask Robin about her husband? A. The creditor believes the spouse's signature will make the applicant more creditworthy B. The applicant is married C. The applicant resides in a community property state D. The applicant's credit reports indicate that the spouse is a better credit risk

The correct answer is c. 12 CFR 1002.5(c)(2)(iv) Outline II B(3)(a) and II B(4)(a) The creditor cannot ask questions about a spouse unless the applicant lives in a community property state or is relying on property located in a community property state. If the applicant does not qualify for credit, the creditor may require a cosigner or guarantor but must leave the choice of the person up to the applicant.

Regulation B defines "elderly" as having attained an age of how many years? Incorrect A. 55 B. 59½ C. 62 D. 70½

The correct answer is c. 12 CFR 1002.6(o) Outline II C(3)(b)

Hector Martinez is a loan officer in a non-community property state. He receives a verbal request for a small business working capital loan from Leon Rogers for his technology consulting business. The business is a sole proprietorship. Mr. Rogers gives Hector a written business plan for his business, a financial statement for the business for the past two years, and a personal financial statement that includes information on himself and his wife. Can Hector assume that the application is a joint application from Mr. Rogers and his wife? A. Yes. Because the financial statement is signed by both Mr. and Mrs. Rogers and includes joint information, the application can be considered to be from both spouses. B. Yes. Because the business is a sole proprietorship, the spouse's financial information is important. Correct C. No. The bank cannot assume the application is a joint one simply on the basis of submission of joint financial information. D. No. Because the business is a sole proprietorship, the bank should assume the application is for individual credit.

The correct answer is c. 12 CFR 1002.7(d) Outline II D(2)(a)(iii)

What may a creditor do if an applicant applies for individual unsecured credit? A. A creditor may never require the signature of another person. B. A creditor may ask for the signature of the applicant's spouse if the applicant is not creditworthy. C. A creditor may require another signature if the applicant relies on jointly owned property to establish creditworthiness. D. A creditor may ask the applicant to withdraw the application if it does not meet the creditor's credit standards.

The correct answer is c. 12 CFR 1002.7(d)(2) Outline II D(2)(a)(i) In a request for unsecured individual credit, the creditor should never ask for the signature of another person unless the applicant is relying on property that is jointly owned by another person, the person does not qualify without a guarantor, or the applicant lives in a community property state. However, the signature of another can be required only on instruments necessary to allow the creditor access to the property under state law.

. An individual borrowed $1,000 to remodel her mobile home. She lives in the mobile home that is not anchored to the ground. The loan will be secured by the mobile home, but the borrower does not own the lot on which it is parked. Based on this information, for HMDA purposes, this loan is considered to be which of the following types of loans? A. Consumer RV B. Home equity C. Home improvement D. Second mortgage

The correct answer is c. 12 CFR 1003.2 Outline II(A)(2), (E)(2) The definition of ''dwelling'' includes mobile homes not attached to real property, so it would be HMDA reportable as a home improvement loan.

Which of the following institutions is NOT subject to the coverage of HMDA reporting as of the 2018 reporting year? • Bank A, with assets of $55 million and located in a large urban city, makes home improvement loans and some home purchase loans to existing customers • Bank B, with assets of $20 million and located in a rural area, has several branches, also in rural areas, including one that makes home improvement and home purchase loans • Mortgage Company C, with assets of $75 million and a home office in a large East Coast city, makes exclusively home purchase loans. A. All the institutions are subject to HMDA B. Bank A C. Bank B D. Mortgage Company C

The correct answer is c. 12 CFR 1003.2 and Staff Commentary Outline (I)(A) Banks must have total assets greater than the annual asset threshold, which is currently $45 million in the preceding calendar year, have an office or a branch in a metropolitan area (MA), make at least one home purchase loan secured by a lien on the dwelling, in addition to other requirements as stated in 1003.2. Mortgage companies must have assets of more than $10 million on the preceding December 31, have an office in a metropolitan area, and have at least 10 percent of their loan origination volume in home purchase loans or that equaled at least $25 million. Therefore, Bank B's asset size exempts it from HMDA coverage.

Mr. Edwards has a First National Bank debit card. The card allows him to withdraw funds from his checking account to pay for goods or services by using major credit card networks. Providers of services that accept MasterCard or VISA will accept Mr. Edwards debit card. Mr. Edwards travels often. In March, while at home, he reviews his checking account statement and notices three ATM transactions whereby funds were debited from his account using the debit card. The transactions were made in San Diego during February. Mr. Edwards never went to San Diego. None of his family members have debit cards. He called the bank and asked to be reimbursed for the $750 that was taken from his account but not authorized by him. What may the bank do? A. Point out to him the language in his account agreement where he agrees to be liable for all withdrawals, whether or not authorized, and tell him that they will not credit his account for the funds B. Tell him that they will investigate and the funds should be credited within 20 business days C. Provisionally credit the account within 10 business days and take up to 45 days to investigate the unauthorized debit D. Provisionally credit the account within 20 business days

The correct answer is c. 12 CFR 1005.11(c) Outline II C This is an unauthorized transfer of funds. The bank cannot contract with the customer for the customer to waive his or her rights. Time periods for error resolutions are not extended for ATM transactions using debit cards initiated within a state.

First National Bank received a notice from James Gilbert that a $500 electronic withdrawal from his checking account, which was shown on his monthly statement, appeared to be an error. What must First National do? A. Investigate the error and make any corrections within 30 calendar days B. Provisionally credit Mr. Gilbert's account for the $500, notify Mr. Gilbert of the credit, investigate the error, and make any corrections within 10 business days C. Provisionally credit Mr. Gilbert's account for the $500 within 10 business days, notify Mr. Gilbert of the credit, investigate the error within 45 calendar days, and make any necessary corrections within 1 business day D. Provisionally credit Mr. Gilbert's account for the $500 within 10 business days, investigate the error, notify Mr. Gilbert of the credit, and make any corrections within 30 calendar days

The correct answer is c. 12 CFR 1005.11(c) Outline II C(4) The bank must either investigate and correct the error within 10 business days or provisionally recredit the account, notify Mr. Gilbert of the recredit, and correct any error within 45 calendar days.

The consumer protections of Regulation E cover which of the following transactions? A. A wire transfer made through the Fedwire system by Bill Rogers to make his mortgage payment B. A $250 automatic transfer made from Ben Stillwater's checking account to his savings account at the same institution C. The check Mrs. Flower gave to the dress shop for her daughter's prom dress and used by the shop to collect information to send a one-time ACH debit to Mrs. Flower's account pursuant to a notice posted in the dress shop D. The $175 loan payment made by Juan Pena to First National by depositing it in one of the bank's ATMs

The correct answer is c. 12 CFR 1005.3(b)(2) Outline I B (4)(g) When a merchant uses a check to obtain account information to initiate an ACH with the consumer's consent, the transaction is covered by Regulation E.

Under Regulation E, when a bank imposes a change that increases fees or charges related to electronic fund transfers, or restricts availability of electronic transfers, it must provide notice to its customers. How many days in advance of the change must the bank notify customers? A. 10 B. 15 C. 21 D. 30

The correct answer is c. 12 CFR 1005.8(a)(1) Outline II A(9)

Which of the following persons would be a Mortgage Loan Originator under the terms of the SAFE Act? A. A real estate agent who assists clients in completing loan applications before turning them over to a lender B. An administrative assistant to a loan officer who sends information requests to loan applicants to facilitate the loan process C. A broker who takes applications and assists the applicant in choosing a mortgage product before sending it to a lender for underwriting D. A customer service representative in a bank who refers applicants to the mortgage department

The correct answer is c. 12 CFR 1007.102 Outline I A and B This is the only choice that is not exempt from the definition of a ''mortgage loan originator''. The customer service representative has no responsibility in taking an application or offering products. The administrative assistant is performing clerical duties only. The real estate agent takes applications but does not offer products.

Under Regulation M, what is a "consumer lease"? A. Any lease of an amount greater than the threshold as annually adjusted B. A consumer lease for the annually adjusted threshold or less with an option to own the property after the lease expires C. A consumer lease for the annually adjusted threshold amount or less for the use of personal property D. Any consumer or agricultural lease for the annually adjusted threshold amount or less

The correct answer is c. 12 CFR 1013.2(e) Outline I A The definition of a consumer lease includes leases of the annually adjusted threshold amount or less for the use of personal property by a natural person for a time period of more than four months, whether or not the person is obligated to purchase the property at the expiration of the lease.

Milton Edwards leased an automobile from First National Bank. The lease contained a provision whereby Milton would be liable for the automobile at the end of the lease based on its fair market value. At the end of the lease, the bank notified Milton that the value of the automobile, based on industry publications, was $10,500 and required him to pay that amount to obtain ownership of the property. Milton objected and requested that the car be individually appraised. What must the bank do? A. Nothing; an estimate of the value based on industry standards is sufficient B. Hire an independent appraiser to appraise the automobile (both parties agree to be bound by the appraisal) C. Allow Milton to hire an independent appraiser to appraise the automobile (both parties agree to be bound by the appraisal) D. Use the average of the car value as determined by a third party appraiser Milton hires with the original bank appraisal

The correct answer is c. 12 CFR 1013.4(I) Outline II A(4)(g) The bank must allow the lessee to hire an independent third-party appraiser to appraise the property and be bound by the appraisal.

The initial disclosure requires that certain disclosures relating to the termination of a lease be given to the consumer. Which of these disclosures is NOT required? A. The conditions under which the lease may be terminated before the end of its term B. Whether or not the lessee has the option to purchase the property and at what price C. Whether the lease may be extended at the option of the lessee D. Whether the lessee will be liable for the difference between the estimated value of the property and its realized value at the termination or end of the lease

The correct answer is c. 12 CFR 1013.4(g) Outline II A(3)(g)

With regard to standards for wear and use of leased property, which of the following statements is true? A. A lessor must adhere to the manufacturer's standards for wear and use of the leased property. B. A lessor must develop and disclose its own standards for wear and use of leased property. C. A lessor must provide a notice of wear and use standards on motor vehicle leases. D. A lessor need not provide a notice of wear and use standards on motor vehicle leases if the lessor imposes an automatic, standardized charge.

The correct answer is c. 12 CFR 1013.4(h)(2) and (3) Outline II A(3)(h) and II A(4)(d) For most leased property, a lessor is not required to set wear and use standards. If it does set such standards, however, they must be disclosed and be reasonable. A statement regarding wear and use standards is required on motor vehicle leases.

Which of the following statements is true regarding the lessee's ability to purchase the leased property? A. The lessor must allow the lessee to purchase the leased property either during the lease term or at the end of the term. B. If the lessor allows the lessee to purchase the property at the end of the lease term, the lessor may not charge more than the equivalent of 12 monthly payments for the property. C. If the lessor allows the lessee to purchase the property at the end of the lease term, the purchase price must be disclosed in the initial disclosure statement. D. The purchase price of the leased property must be mutually agreed on by the lessor and the lessee. 11. With regard to standards for wear and use of leased

The correct answer is c. 12 CFR 1013.4(i) Outline II A(4)(e) The lessor must disclose the purchase price of the leased property and whether the lessee is able to purchase the property during the term or at the end of the lease term. The lessor is not required to allow the lessee to purchase the leased property, nor must the lessor bargain with the lessee over the price of the property.

ACME Bank has a joint marketing agreement with Friendly Brokerage Company whereby ACME and Friendly agree to jointly market certain financial products. ACME would like to refer customers to Friendly by providing the Friendly brokerage officer with names of ACME customers who might be interested in the financial products Friendly offers. Friendly has signed an agreement with ACME promising not to disclose any information about ACME's customers to others. What type of responsibility does ACME have to its customers under the Privacy Regulation? A. ACME must give a disclosure and opt-out opportunity to all customers. B. ACME has no disclosure or opt-out responsibilities. C. ACME must give customers a notice that it provides information to companies with which it has joint marketing agreements. D. ACME must give an opt-out option but no disclosure.

The correct answer is c. 12 CFR 1016.13 Outline III E(1)

Friendly Service Bank has an affiliated insurance company, FSB Insurance. In which of the following cases would the consumer receiving the marketing materials have to have received the affiliate marketing opt-out opportunity? A. Friendly Service Bank obtains credit score qualification information from FSB Insurance to identify which of the bank's loan customers would be eligible for FSB Insurance's products. The bank sends the qualified customers an FSB Insurance brochure. B. Friendly Service Bank using, a city phone directory, sends a brochure containing marketing materials on its own products, as well as FSB Insurance's products. C. FSB Insurance receives individualized credit score information from Friendly Service Bank about the bank's loan customers. After selecting eligible customers from the list, FSB Insurance sends a qualified list back to Friendly Service Bank who sends the FSB Insurance marketing materials to the selected bank customers. D. Friendly Service Bank sends its own customers a marketing brochure containing information about its own loan products

The correct answer is c. 12 CFR 1022.21 Outline V A(4)(a) The affiliate marketing rules allow the bank to obtain selection information from an affiliate to send marketing materials to its own customers who might be eligible for the products sold by the affiliate without requiring a notice and opt out by the bank's own customers. The bank can send information to individuals whose names are obtained on public lists without giving an opt-out notice, even if some of them happen to be customers of their affiliates. The bank can also market its own products without requiring an opt-out opportunity. However, when an affiliate, such as FSB Insurance, obtains individualized information on the bank's customers and selects them to receive marketing materials, then the opt-out notice requirement is triggered.

Which of the following practices is NOT prohibited by RESPA? A. A lender requiring the borrower to pay a fee for the preparation of a HUD 1 settlement statement Incorrect B. A seller conditioning a property sale (that involves a federally related mortgage) on the buyer's purchase of title insurance from a certain title company C. A lender requiring a consumer to pay for the preparation of documents by a certain attorney to represent the lender's interest in a real estate transaction D. A bank paying a referral fee to an independent real estate agent who has generated new mortgage loan customers

The correct answer is c. 12 CFR 1024.14(d) and 1024.15(b)(2) Outline II A(3)(e) and II C(1)

Acme Mortgage is open for business Monday - Saturday. On Tuesday, March 22nd, Acme Mortgage received an application from Mr. and Mrs. Jack Smith which contained their names, social security numbers, income, place of employment, amount of mortgage loan they wanted, and an estimate of the value of the property they were wanting to purchase. On Friday, March 25th, the Smith's had their realtor deliver the purchase agreement which contained the property address to Acme. Acme is required to provide the Smiths with an estimate of their closing costs when and in what format? A. By Friday, March 25th, Acme should deliver or place in the mail a Good Faith Estimate to the Smiths. Incorrect B. By Friday, March 25th, Acme should deliver or place in the mail a Loan Estimate as required by Regulation Z. C. By Tuesday, March 29th, Acme should deliver or place in the mail a Loan Estimate as required by Regulation Z. D. By Wednesday, March 30th, Acme should deliver or place in the mail a Good Faith Estimate.

The correct answer is c. 12 CFR 1024.2, 12 CFR 1026.2(a)(3)(ii) and 12 CFR 1024.5(4)(d)(1) Outline I E and I D(7) The required good faith estimate disclosure for purchase transactions is part of the combined Loan Estimate disclosure required under Regulation Z. The timing requirements for the Loan Estimate to be sent is the same as a Good Faith Estimate - three business days after receipt of a completed application as defined in both RESPA and TILA.

Of the following loans, which one would NOT be considered a federally related mortgage under RESPA? A. A purchase loan to a consumer secured by a mobile home and lot Incorrect B. A purchase loan to a consumer secured by a condominium C. A business loan to a corporation secured by a one- to four-family dwelling D. A home improvement loan to a consumer secured by a dwelling

The correct answer is c. 12 CFR 1024.5(b)(2) Outline I D(1) Loans made for business purposes that are secured by a one- to four-family dwelling are exempt from the coverage of RESPA.

First National Bank makes many loans that are covered by RESPA. Most are closed at a title company identified by First National Bank. First National's staff prepares the Good Faith Estimate. The title company generally prepares the HUD-1 Settlement Statement. First National's compliance officer conducted an audit of the real estate files and found that, in a significant number of cases, the title-related charges on the Good Faith Estimates varied from those on the subsequently provided HUD-1s by more than 20 percent, causing all of the charges within its category of settlement costs to be greater at closing by 12 percent to 17 percent. Is this a problem for the bank? Incorrect A. Yes, title-related fees should not vary by more than 15 percent. B. Yes, these disclosures should be exactly the same. C. Yes, this category of fees should not vary by more than 10 percent. D. No. It is generally understood that the amounts in the Good Faith Estimate are initial numbers only, and they are expected to change.

The correct answer is c. 12 CFR 1024.7(d) and (e) Outline II A(2)(f)(ii)(b)

A HUD-1 Settlement Statement must be given to the borrower at the time of settlement in a RESPA transaction under which of the following conditions? Incorrect A. When the borrower waives the right to receive a statement B. When the borrower does not attend the settlement C. When the borrower prepays all settlement costs D. When there is no settlement meeting between the parties

The correct answer is c. 12 CFR 1024.8 and 12 CFR 1024.10(c) and (d) Outline II A(5)(d) The borrower must receive a HUD-1 Settlement Statement at the time of settlement unless no settlement meeting is held, the borrower waives his or her right to receive the statement, or the borrower does not attend the settlement. In any of these events, the HUD-1 Settlement Statement must be given to the borrower as soon as practicable.

Which of the following situations is NOT considered a billing error? A. The failure to credit a payment B. The inclusion of a charge for an item not purchased by the consumer C. The inclusion of a charge for an item the quality of which dissatisfied the consumer D. The inclusion of a charge for an item delivered to the wrong location

The correct answer is c. 12 CFR 1026.13(a) Outline VIII J(2) This section does not cover disputes related to the quality of an item or service the consumer received.

If a bank completes an investigation of an alleged billing error and determines that no billing error occurred and the consumer owes all or part of the amount, what must the bank do? A. Immediately report to the credit bureau the amount that was the subject of the investigation as delinquent B. Disallow any free-ride period normally given to the consumer on the account for amounts owing periodically and require the consumer to make the payment immediately Correct C. Send the consumer a notice that explains why no billing error occurred D. Require the consumer to produce documentation for any future billing error notices

The correct answer is c. 12 CFR 1026.13(f) and 1026.13(g) Outline VIII J(7) The creditor must send a notice to the consumer explaining why the billing error alleged by the consumer is not correct. The creditor must also furnish documentation at the consumer's request. The consumer must be given any free ride that is normally offered under the terms of the plan, and the creditor must allow the consumer time to pay the amount before reporting it as delinquent.

On Monday, ABC Bank received a written application from the Browns for a loan to purchase their home. Later that day ABC mailed the Browns their early TILA disclosures. On what day may ABC debit the Browns' account for an application fee? A. Tuesday B. Wednesday C. Thursday D. Friday

The correct answer is c. 12 CFR 1026.19(e)(2)(i) Outline IV A(1)(e)(viii)

Which of the following disclosures is NOT required on the itemization of amount financed? A. The amount of proceeds distributed directly to the borrower Incorrect B. The amounts paid to others on behalf of the borrower C. An itemization of the various types of finance charges D. The persons to whom amounts are paid on the borrower's behalf

The correct answer is c. 12 CFR 1026.19, 12 CFR 1026.37 Outline IV A(5) All of the alternative answers are required except for c. Government monitoring information is collected on the application. It is not disclosed on the TILA disclosure.

For how long may consumers exercise the right to rescind transactions in closed-end loans? A. Three years after the consummation of the transaction B. Three calendar days after the consummation of the transaction or the receipt of notice of the right to rescind, whichever is later C. Three business days after the later of the consummation, delivery of notice of the right to rescind, or delivery of required disclosures D. Three business days after the receipt of the early disclosures

The correct answer is c. 12 CFR 1026.23(a)(3) Outline IV D(2) This is the rule for a normal transaction. The consumer will have the right to rescind the transaction for three years after the consummation of the transaction if the lender fails to give the required disclosures or the rescission notice to the consumer in a rescindable transaction.

Which of the following statements is true regarding providing credit cards accounts to cardholders under the age of 21? A. Accounts can only be issued to cardholders who are at least 21 B. Co-signers are required on credit card accounts to consumers who are under 21 Correct C. The consumer must submit a written application D. Consumers must be provided with credit counseling prior to card issuance

The correct answer is c. 12 CFR 1026.51(b)(1) Outline IX C (3) Credit card accounts may be issued to young consumers, but the issuer must obtain a written application and is required to determine if the consumer has an independent ability to make the minimum payment or obtain a co-signer or guarantor who is at least 21 and has the ability to make the payment.

How must a card issuer disclose a minimum payment on a periodic statement for an open-end credit account that is not home-secured? A. By disclosing the actual repayment for the consumer's account balance, rate, and terms over the remaining term of the account B. By providing a toll-free telephone number that will respond with a generic payment example C. By disclosing the estimated monthly payment for repaying in 36 months D. By disclosing several generic examples that could apply to the consumer's account

The correct answer is c. 12 CFR 1026.7(b)(12)(i)(F) Outline VIII D(3)(r)(vi)(a)

A bank's compliance officer received a complaint from a credit card customer indicating that she received her credit card statement and noted that her credit limit had been reduced to less than the balance she owes. She claims that she was charged an over-the-limit fee before she was informed. The compliance officer reviewed the statement and determined that the customer was correct. If the bank determined that the credit limit should be lowered, what should it have done? A. Charge over the limit fees until the balance owed falls below the credit limit B. Notify the customer that they were terminating the account C. Provide notice 45 days before the decrease to the credit limit D. Suspend future credit privileges

The correct answer is c. 12 CFR 1026.9(c)(2)(vi) Outline VIII E(3)(h)(i) If a creditor decreases a consumer's credit limit, no fee or penalty rate can be charged when a consumer exceeds the new limit, unless a notice of the new limit was provided orally or in writing at least 45 days before imposing the limit.

Which of the following rate disclosure formats would be acceptable in an advertisement of First National Bank's consumer certificate of deposit? A. 1 percent annual percentage rate B. 1.15 percent C. 1.15 percent annual percentage yield D. 1 percent interest rate

The correct answer is c. 12 CFR 1030.8(b) Outline II D If an advertisement states a rate, it must be the annual percentage yield, using that term. The interest rate may also be disclosed, but not more conspicuously than the APY.

When an advertisement states the APY, what other disclosure does Regulation DD require? A. Interest rate, using that terminology B. Index for variable rate transactions C. Minimum balance to obtain the stated APY D. Advertisement inviting the reader to inquire about other features of the account

The correct answer is c. 12 CFR 1030.8(c)(3) Outline II D(7)(c)

Bank B is a correspondent of Bank A. Which of the following must be included in Bank A's calculation of credit exposure to Bank B? A. A loan to Mr. Pierce from Bank A secured by Bank B common stock B. Bank B's purchase of U.S. government T-Bills on behalf of Bank A under an overnight repurchase arrangement C. Bank A's deposit account of $1 million in Bank B D. A letter of credit issued by Bank B and pledged against the ACME Company's debt at Bank A

The correct answer is c. 12 CFR 206.2(d) and 206.4(d) Outline II B(2) Except for answer (c), all of the other types of exposure are specifically excluded from the calculation of total credit exposure.

Williams National Bank has its home office in New York State; however, it has branches in Nebraska. The federal banking agencies most recent host state loan-to-deposit publication lists the loan-to-deposit ratio for Nebraska as 78 percent. For Williams Bank to pass the loan-to-deposit screen of the Reigle-Neal Act, what must its loan-to-deposit ratio be for Nebraska? A. At least 78 percent B. At least 50 percent C. At least 39 percent D. At least 25 percent

The correct answer is c. 12 CFR 208.7(c); 12 CFR 369.3, 12 CFR 25.63 Outline II A(1) The bank's statewide loan-to-deposit ratio must be at least 50 percent of the host state's loan-to-deposit ratio. The federal agencies published the host state (Nebraska's) loan-to-deposit ratio as 78 percent, so the bank's statewide ratio must be at least 50 percent of that amount—or 39 percent.

ACME Bank has a separate page on its Web site where it describes insurance products, such as life insurance and health and disability insurance. The page invites consumers to call the bank officer in charge of selling these products. The Web site's lending page also describes consumer loans and uses the following phrase: "Have peace of mind—credit life and disability insurance are available on all consumer loans to qualified borrowers." Neither the insurance page nor the lending page mentions insured deposits. What does ACME need to do to make sure its Web site is in compliance? A. Nothing. As long as the insurance products are segregated, the Web site is in compliance. B. Place the advertising disclosures (not a deposit, not insured by the FDIC, and so on) on the insurance page. C. Place the advertising disclosures on both the Web site's insurance page and its lending page. D. Create a separate Web site for all insurance products.

The correct answer is c. 12 CFR 208.84(d); 12 CFR 14.40(d); 12 CFR 343.40(d), 12 CFR 136.40(d) Outline IV

In April Lillian Redmond, the teller supervisor for First National Bank, discovers five counterfeit $20 bills in several teller drawers. In May and in June she discovers two additional counterfeit $20 bills. She has no knowledge of criminal activity on the part of any of the bank's employees or customers. She does not suspect any particular person in this transaction. Which of the following statements is true? A. Ms. Redmond must report the counterfeit funds on a SAR and must name the most likely individual(s) on the report. B. Ms. Redmond must report the counterfeit funds on a SAR but is not required to name any individual(s) on the report. C. Ms. Redmond need not file a SAR on this incident because the total amount is less than $25,000. D. Ms. Redmond need not report this incident on a SAR because each incident is less than $5,000.

The correct answer is c. 12 CFR 21.11(c)(3), 12 CFR 163, 12 CFR 208.62(c), and 12 CFR 353.3(a) Outline XI A(1) Because Ms. Redmond does not have a substantial basis for identifying a suspect and the amount is under $25,000, she may report it but is not required to do so.

Bob Jones, president of ACME bank, has had a banking relationship with Linda O'Reilly, a local real estate agent for several years. Ms. O'Reilly keeps most of her deposit accounts with ACME and also has had several personal loans there. Over a three-month time period, Ms. O'Reilly consistently (two or three times a week) brings to the bank a series of money orders in amounts ranging from $7,000 to $15,000, made payable to her in denominations of $1,000, and asks the teller to take them and issue one cashier's check payable to her. After this activity has continued for three months, Mr. Jones notices the frequency of cashier's checks issued to Ms. O'Reilly on a management report. It catches his attention because he does not know why Ms. O'Reilly would need this number of cashier's checks. On inquiry, the head teller explains the weekly transactions. Which of the following statements best describes Mr. Jones's responsibility? A. He should immediately file a SAR. There is no logical explanation for this activity. B. He should immediately file a CTR. Ms. O'Reilly is trying to evade the BSA currency transaction. C. He should ask Ms. O'Reilly why she is conducting these transactions and then determine whether to file a SAR. D. He is not required to do anything. Mr. Jones is well acquainted with this customer, and it is not illegal to purchase cashier's checks.

The correct answer is c. 12 CFR 21.11; 112 CFR 163; 2 CFR 208.62(c)(4)(iii); 12 CFR 353.3 Outline XI A(1) This activity is obviously out of the realm of the usual types of banking for this customer. It also appears somewhat suspicious. The exchange of one form of monetary instrument for another is unusual for this customer when done this frequently. Therefore, the banker has a responsibility to investigate and determine if any laws have been broken.

First National Bank is a newly chartered bank. Which of the following security-related procedures is NOT required under the Bank Protection Act? A. Appoint a security officer B. Write a security program C. Hire a security consultant to inspect the bank for the effectiveness of the bank's security devices D. Write procedures to assist in preserving evidence of crimes

The correct answer is c. 12 CFR 21.2 and 21.3 Outline I A and B

What should a bank's Bank Secrecy Act compliance program include? A. All lobby notice requirements B. The one-year record retention requirements C. Designation of individuals responsible for day-to-day compliance D. A list of types of loans covered by the Act

The correct answer is c. 12 CFR 21.21(c)(3), 12 CFR 208.63(c)(3), and 12 CFR 326.8(c)(3) 12 USC 1958 Outline I B(4)(c)

Which of the following sets of policies or procedures is NOT a requirement of a security program? A. Policies addressing what to do in case of a robbery B. Procedures for opening the bank at the beginning of the day C. Procedures for keeping customer information private D. Policies addressing periodic reporting to the board of directors

The correct answer is c. 12 CFR 21.3(a); 12 CFR 208.61(c)(1) and (e); 12 CFR 326.3(a); 12 CFR 168.3(a) Outline I C(2) Safeguarding customer information is not covered under the requirements for a security program. It is, however, covered under the privacy regulation discussed under Interagency Guidelines Establishing Standards for Safeguarding Customer Information.

Which of the following does an extension of credit NOT include? A. An advance by means of an overdraft or cash item B. The making or renewal of any loan or granting of a line of credit C. An advance against accrued salary D. An acquisition of a note on which an insider is a maker, drawer, or guarantor

The correct answer is c. 12 CFR 215.3(b)(1) Outline I H(1) An advance against accrued salary or other accrued compensation is not an extension of credit

What is the longest time after board approval that a bank can approve a line of credit for an executive officer? A. 12 months of such approval B. 9 months of such approval C. 14 months of such approval D. 6 months of such approval

The correct answer is c. 12 CFR 215.4(b)(3) Outline II A(4)

First National Bank would like to adopt a recordkeeping system that complies with the requirements of Regulation O. Which of the following best describes the recordkeeping system required by Regulation O? A. A system in which the bank annually surveys all executive officers of First National and its affiliates to determine the insiders' related interests B. A system in which the bank asks all borrowers as loans are made whether the borrower is a related interest of an insider C. A system that surveys insiders of First National annually and requires each insider to disclose his or her related interests D. A system that requires an annual survey of affiliate insiders

The correct answer is c. 12 CFR 215.8 Outline II C An annual survey is not required of affiliates of the bank. However, it is required for insiders of the bank itself. The borrower inquiry method is sufficient for affiliate insiders.

Which of the following is a high-net-worth customer? A. An individual with $5 million in assets, including her home B. A corporation with $15 million in revenues C. A couple with a net worth of $10 million D. An individual who is not acting with his spouse, with $1 million in assets and another $3 million in community property

The correct answer is c. 12 CFR 218.701(d)(1) and (2) Outline Regulation R III B(8)(a) and (b) An individual's net worth is calculated by subtracting the value of their primary residence. An individual acting without a spouse will have net worth calculated with community property. A corporation cannot be a ''high-net-worth'' individual. It must be a natural person.

Which of the following advertising activities indicate that a bank would NOT be exempt from SEC registration requirements? A. Listing its securities transfer services as a service the bank provides for IRA accounts along with other IRA benefits B. Listing its securities services for trust accounts in the bank's extensive trust services brochure C. Mentioning in a print advertisement that the bank provides accommodation securities trades for its regular custodial accounts D. Stating in an advertisement concerning employee benefit plan services that the bank provides securities brokerage services for employee benefit plan accounts

The correct answer is c. 12 CFR 218.760(a)(2)(ii) Outline Regulation R, III F(2)(a) Advertisements generally can list a bank's securities services (such as order taking and safekeeping) when providing a broader description of a service. However, advertisements for custodial services NOT involving employee benefit, IRAs, and similar accounts may NOT state that the bank provides order-taking services for custodial accounts.

Assume that the properties involved in the following loans are located in special flood hazard areas. Which loans would NOT require flood insurance as a condition of the loan? A. A mortgage loan made to a consumer secured by a residence in a community in which flood insurance is available B. A commercial loan secured by residential real estate located in a community in which flood insurance is available C. A consumer loan secured by a lake house located in a community in which flood insurance is not available D. A loan for the purpose of making investments secured by commercial rental property located in a community in which flood insurance is available

The correct answer is c. 12 CFR 22.2 and 22.3, 12 CFR 339.2 and 339.3, 12 CFR 208.25(b) and (c), and 12 CFR 172.2 and 172.3 Outline I A Any loan secured by a building or mobile home located in a special flood hazard area where flood insurance is available must have flood insurance as a condition of making the loan.

Which of the following credit arrangements would most likely be considered a purpose credit because it is indirectly secured by margin stock? A. A loan made to purchase margin stock secured by nonmargin stock B. A loan made to a company for various corporate purposes, including the purchase of margin stock, secured by the corporate assets, which from time to time include margin stock; on the date of the consummation of the transaction approximately 10 percent of the assets of the company are margin stock C. A loan made to purchase margin stock, guaranteed by an individual who has pledged margin stock as security for the guarantee D. Bank is the trustee for a qualified pension plan from which the participants may borrow and use their interest in the plan as security; a participant borrows money for the purpose of purchasing margin stock

The correct answer is c. 12 CFR 221.2 Outline II A The Federal Reserve Board has issued a staff opinion letter indicating that if the guarantee is collateralized by margin stock and the purpose of the loan is to purchase stock, then the loan is indirectly secured by margin stock.

How is the maximum loan value of margin stock defined? A. As a percentage of the amount to be loaned B. As a percentage of the book value of the stock C. As a percentage of the current market value of the stock D. As a percentage of the good-faith loan value of the stock

The correct answer is c. 12 CFR 221.7 Outline II E

A national bank may make a loan to an affiliated mortgage company that is 100 percent owned by the same bank holding company, if the aggregate amount of all covered transactions of the national bank and its subsidiaries does not exceed a certain percentage of capital and surplus of the national bank. What is that percentage? A. 10 percent B. 15 percent C. 20 percent D. 25 percent

The correct answer is c. 12 CFR 223.11 Outline II A(2)

First National Bank would like to make a loan to an affiliate bank. Which of the following would NOT be acceptable as collateral for such a loan? A. U.S. Treasury bills in an amount equal to the loan B. Stock traded on the New York Stock Exchange that has a market value equal to 130 percent of the loan amount C. An account for the benefit of First National held at the affiliate bank in an amount equal to the loan amount D. Eligible bankers' acceptances with a market value equal to the loan amount

The correct answer is c. 12 CFR 223.14 Outline II B(1) To be acceptable collateral, a deposit account must be segregated and with the bank. In this case the account is being held at the affiliate, and it is therefore not proper collateral.

First National Bank made a loan to a nonbank affiliate of its holding company that is secured by stocks, bonds, and debentures. At the outset of the loan, First National had collateral with a market value equal to 150 percent of the loan amount. Over time, some of the collateral has been retired and amortized. Some has dropped in value. What is the responsibility of the bank regarding the collateral? A. The bank has no responsibility once the loan is made provided the percentages were correct at the loan's inception. B. The bank must check values every month to ensure that the percentages are correct at all times. C. The bank must check values when the collateral is retired or amortized to make sure the collateral is replaced with securities that will bring the loan into compliance with the percentages required in the law. D. The bank must annually check the value of the collateral to ensure that the percentage of value is maintained.

The correct answer is c. 12 CFR 223.14(e) Outline II B(4)

A member bank wants to sell assets to an affiliated bank that is 100 percent owned by the same bank holding company. Is this transaction allowed? A. No. It is prohibited. B. Yes, but it is subject to an aggregate limit of 10 percent of the member bank's capital and unimpaired surplus. C. Yes. It is permitted, if the assets are not low quality. D. Yes, but it must be classified on the receiving bank's books as low-quality assets.

The correct answer is c. 12 CFR 223.15(a) Outline II C A member bank could only purchase the asset if it had committed to purchase it prior to the asset becoming ''low quality.''

Which of the following transactions does NOT require prior approval of the Federal Reserve Board? A. The formation of a bank holding company B. The acquisition by a bank holding company of a subsidiary C. The acquisition of 25 percent of voting stock of a bank by another bank, in good faith, in its fiduciary capacity with no power to vote D. The acquisition of 25 percent of voting stock of a bank by another bank in its fiduciary capacity for the benefit of the acquiring bank's employees

The correct answer is c. 12 CFR 225.11(a) and (b), and 12 CFR 225.12(a) Outline IV A and B Choices (a) and (b) clearly require Federal Reserve Board approval. To avoid the necessity of Federal Reserve Board approval for choice (d), this transaction would have to be for the beneficial interest of parties other than the acquiring bank's employees, shareholders, or subsidiaries.

Which of the following is NOT a factor considered by the Federal Reserve Board when it evaluates an application under Regulation Y? A. The financial strength of the applicant B. The management strength of the applicant C. The current nonbanking activities of the applicant D. The effect of the transaction on competition

The correct answer is c. 12 CFR 225.13(a) and (b),br> Outline IV C

If a bank uses a staff appraiser to appraise property that secures loans at the bank, in which case would the appraiser most likely NOT be considered to be independent? A. The appraiser is an employee of the bank's affiliated holding company B. The appraiser is an employee of the bank's affiliated financial institution C. The appraiser is an employee in the commercial loan department D. The appraiser is employed by the bank but reports to the audit department

The correct answer is c. 12 CFR 225.65; 12 CFR 323.5; 12 CFR 34.45; 12 CFR 164.5 Outline III A The appraiser may work for the bank or one of its affiliates, but he or she cannot report to the lending department responsible for approving the loans related to the appraisals.

A bank received a signed letter criticizing its performance in meeting the credit needs of the community, but not adversely reflecting upon any individual bank employee's reputation. What must the bank do with this letter? A. Have it reviewed and discussed by the board of directors B. File it with the regional office of the bank's federal regulator C. Retain it in the CRA public comment file D. Answer it within 10 business days

The correct answer is c. 12 CFR 228.43(a)(1); 12 CFR 345.43(a)(1); 12 CFR 25.43(a)(1); 12 CFR 195.43(a)(1) Outline II E(1)(a) CRA does not require the bank to answer the writer, nor to take specific actions, such as reporting it to the board of directors or sending it to its regulatory agency. However, the bank must place the comment in its CRA public file. The bank may place a response to the comment in the file also. However, if the comment or bank response would adversely affect the good name or reputation of a person other than the bank, or if it would violate a law (for example, the privacy regulation) it should not be placed in the file.

Which of the following is NOT a requirement of CRA? A. To delineate the bank's assessment area(s) B. To collect loan data C. To approve the bank's CRA statement at an annual board meeting D. To report small business loan data

The correct answer is c. 12 CFR 228; 12 CFR 345; 12 CFR 25; 12 CFR 195 Outline II This requirement is not in the regulation as described in the outline at Section II. It used to be a requirement but was eliminated in the CRA reform regulation of 1995.

The following deposits were made on Monday at First National Bank: • Martha Smith, a new customer, deposited $150 in checks into her checking account, which she had opened the previous week • Jerry Williams, an established customer, deposited a $7,000 check from his father • Amanda Thomas, also an established customer, deposited her $600 IRS refund into her account What funds must be made available to these depositors on Tuesday? A. $200 for each B. $200 for Martha and Jerry; $600 for Amanda C. $200 for Jerry; $600 for Amanda Incorrect D. $200 for Martha; $600 for Amanda

The correct answer is c. 12 CFR 229.10(c)(1)(i) and 229.13(a) and (b) Regulation CC Outline III A, B, and E Jerry's deposit is a check that does not have to be available the next day, with the exception of $200. Because Amanda's check is on the U.S. Treasury, her entire deposit is available the next day. Martha's account is a new account; therefore, none of her deposit is required to be made available on the next business day.

Which of the following accounts is considered to be a new account for delayed funds availability purposes? A. A new account opened by an established customer who has had several transaction accounts with the bank for a long time B. A new account opened by a customer who previously had an account but closed it 15 days before opening the new one C. A new account opened by a customer who has had a regular savings account at the bank for five years D. A new account opened by a customer who is a joint account holder on another checking account at the bank but who has no other individual account

The correct answer is c. 12 CFR 229.13(a) and 229.2(a) Regulation CC Outline I and III E(1) A savings account is not a transaction account and therefore is not an account according to the definition given in Regulation CC. Therefore, the customer has not had an account at the bank at the time the new account was opened, so the new account exception applies.

Under Regulation GG which is a responsibility of regulated depository institutions? A. Review check transactions on consumer accounts that regularly have large checks deposited B. Screen ACH transactions of commercial accounts C. Implement due diligence procedures for new commercial accounts D. Monitor wire transfer instructions

The correct answer is c. 12 CFR 233.6(b) Outline II C A financial institution that is a non-exempt participant in a payment system must have policies and procedures to conduct due diligence on new commercial accounts to be deemed to be in compliance with Regulation GG. Institutions are not required to monitor individual transactions

Which of the following is not exempt from the rules on reasonable and proportional pricing of electronic debit transactions? A. A debit card issued by a community bank with $8 billion in assets B. A debit card issued by the federal government for payment of benefits C. A debit card issued by a community bank with $7 billion in assets, affiliated with another depository institution with assets of $5 billion D. A prepaid card that cannot access a bank account

The correct answer is c. 12 CFR 235.5(a) Outline II C(1) The bank and its affiliates have assets totaling over $10 billion so they are covered

A savings and loan holding company that received approval to acquire a savings association in 1986 is grandfathered for purposes of the permissible activities as long as: A. The savings association remains under $500 million in assets B. All of the subsidiaries of the savings and loan holding company remain under $5 billion in assets C. The savings association does not increase its number of locations D. The savings association does not move any branches to a different location

The correct answer is c. 12 CFR 238.52(b) Outline IV (B)(4) The only alternative that is specifically prohibited in a grandfathered institution is to increase the number of locations.

Which of the following is a true statement regarding a mutual holding company's subsidiary holding company? A. It may issue stock to anyone without restriction B. It may only issue stock to its parent C. It must obtain FRB approval before issuing stock to any person except its parent D. It may issue stock to its parent, or any other existing stockholder

The correct answer is c. 12 CFR 239.24 Outline II J (8)

Which of the following actions is NOT a requirement of the bank's directors in implementing an information security program? A. Approve the information security program B. Determine whether the information security officer is qualified C. Physically audit the bank's online banking system D. Review management reports on information security periodically

The correct answer is c. 12 CFR 30 Appendix B Section III; 12 CFR 208 Appendix D-2 Section III; 12 CFR 364 Appendix B Section III, 12 CFR 570 Appendix B, Section III Outline II B This is not a requirement for the board of directors.

To which of the following do national bank and savings association lending limit rules apply? A. Loans secured by savings bonds B. Loans secured by Treasury bills C. Loans secured by third-party guarantees D. Loans secured by customer deposits

The correct answer is c. 12 CFR 32.2(q), 32.3(c)(6)(i), and 12 CFR 32.3(c)(3) Outline I C and D The loans mentioned in the other alternatives are specifically exempted from coverage of the lending limit rules.

First National Bank had a legal lending limit of $150,000. On March 1 it had outstanding to ABC Company loans equaling $100,000. On that same day, it made a contractual commitment to lend to ABC Company another $50,000. The bank's capital base deteriorated during the next three months, and by the time the bank was called on to fund its commitment to ABC Company, its lending limit had dropped to $125,000. Can the bank fulfill its commitment to ABC Company by lending the additional $50,000? A. Yes, but only if it immediately sells a participation for $25,000 without recourse. B. No. The bank's lending limit has dropped, and the loan cannot be funded. C. Yes. Because the commitment was legal when it was made, it is still legal. D. No, not unless ABC Company secures the additional $50,000 with readily marketable collateral.

The correct answer is c. 12 CFR 32.6 Outline V A(1)

Consider the following deposit balance information: Account Name Deposit Balance Ann Jones $150,000 Ann Jones $250,000 Jim Smith and Ann Jones $250,000 Jim Smith $175,000 Ann Jones: Agent for Jim Smith $475,000 Ann Jones and Jim Smith $300,000 TOTAL $1,600,000 How much of the $1,600,000 is FDIC insured if the SMDIA is $250,000? A. $725,000 B. $750,000 C. $1,000,000 D. $1,600,000

The correct answer is c. 12 CFR 330.6, 12 CFR 330.9 Outline III A and B Accounts Ann Jones $150,000 Ann Jones $250,000 Jim Smith and Ann Jones $250,000 Jim Smith $175,000 Ann Jones: Agent for Jim Smith $475,000 Ann Jones and Jim Smith $300,000 TOTAL $1,600,000 Total of balances in Ann Jones individual accounts—$400,000 Total insured: $250,000 Total of balances in Ann Jones and Jim Smith joint accounts $550,000; assume that each has a one-half interest ($275,000 each)—total of $500,000 insured Total of balances in individual accounts for Jim Smith—$175,000 in account styled ''Jim Smith,'' and $475,000 in account styled ''Ann Jones, Agent for Jim Smith,'' all are counted as individual account—total balances are $650,000; total insured: $250,000 Total insured balances: $1,000,000

ABC Bank failed with the following accounts for Fred Jones on its books: • A certificate of deposit in the name of Fred Jones with a principal balance of $250,000 and accrued interest of $6,250 • An account for Fred Jones, for which Mr. Jones has now provided documentation showing that he opened the account as a payable-on-death account for his son; the account has a balance of $1.25 million • An IRA for the benefit of Fred Jones with a balance of $250,000 • An account styled "Fred Jones, trustee for Nancy Jones and Roger Wilson" with a balance of $200,000; Nancy is Fred's daughter, Roger is Fred's brother If the SMDIA is $250,000, how much of Fred's money is insured? A. $950,000 B. $750,000 C. $700,000 D. $500,000

The correct answer is c. 12 CFR 330.6, 330.9, and 330.10 Outline III A, B, and C Fred's certificate of deposit is a single ownership account and is insured for the full principal balance of $250,000. The interest is not insurable because it would put the account over the $250,000 limit. The account that Fred now claims was a revocable trust would be considered a single ownership account and would be aggregated with the certificate of deposit for purposes of determining the application of deposit insurance. The FDIC will rely only on the bank records in this case. The intention to make the account a revocable trust must be reflected on the records of the account. The IRA is fully insured. The revocable trust account for Fred's daughter and brother is fully insured because both beneficiaries are eligible to be covered.

In state bank advertisements, on what must Fair Housing logos be placed? A. Bank communications B. Bank advertising C. Advertising for home improvement loans D. Bank lobby signs

The correct answer is c. 12 CFR 338.3(a)(1) Outline II B The Fair Housing logo must be placed on all advertisements for home purchase and home improvement loans.

Of the following loans made by a national bank, which loan is NOT covered by the OCC ARM regulation? A. A loan to purchase a single-family dwelling to be used as a residence, secured by the dwelling with an adjustable interest rate b. B. A loan made to purchase a mobile home to be used as rental property, secured by the home with a variable interest rate c. C. A loan made to purchase an eight-unit apartment complex, secured by the building, made payable on demand with a variable rate of interest d. D. A loan made to purchase a duplex, secured by the dwelling, amortized over 15 years with a five-year maturity, at a variable rate of interest

The correct answer is c. 12 CFR 34.20 Outline I B This regulation covers only loans made to purchase a one- to four-family dwelling. The regulation does not cover loans secured by or for the purchase of multifamily dwellings.

On which of the following adjustable-rate loans must the bank use an index beyond its control? A. A loan to purchase a home to refurbish and resell for a profit B. A loan to purchase a vacation home C. A loan to purchase a duplex where the borrower will live in one of the units D. A loan to purchase a home to be used as rental property

The correct answer is c. 12 CFR 34.22 Outline II C Only a loan secured by the borrower's principal residence qualifies for the protection of the ARM regulation that prevents the financial institution from using an index within its control. Other loans, even if they are for a consumer purpose, are not covered by the rule.

A bank may include all of the following in the narrative portion of its financial disclosure except for one. Which of these pieces of information CANNOT be disclosed? A. Information relating to mergers and acquisitions B. Information related to a regulatory enforcement action that currently applies to the bank C. An excerpt from the latest regulatory examination prepared by the bank's regulatory agency D. The bank's future plans for product development

The correct answer is c. 12 CFR 350.4(c); 350.9 and 12 CFR 18.4(c); 18.9 Outline II C(4) and G(1) A bank cannot disclose its regulatory examination. The other information may be included.

An insured depository institution ("IDI") is required to comply with the information technology requirements of 12 CFR Part 370 if during the two consecutive preceding quarters the IDI had: A. One million or more deposit accounts B. Two million or more deposit accounts and at least $10 billion in assets C. Two million or more deposit accounts D. At least $10 billion in assets

The correct answer is c. 12 CFR 370 Outline VIII

A subsidiary of First National Bank can legally participate in all but one of the following businesses. In which business may the subsidiary NOT legally participate? A. Selling securities B. Selling insurance C. Developing real estate D. Providing financial planning advice

The correct answer is c. 12 CFR 5.39 Outline III C This is a power that is specifically excluded by the law.

Elliot Pierce, a borrower at ACME bank, defaulted on his home loan. It is the seventh home he has owned in his life. Elliot defaulted because, although his job is stable, he decided that he overpaid for the house and he could rent an apartment and save more money. Elliot has defaulted on mortgages in the past and believes his credit will recover. The bank is planning to send Elliot a default letter. Does the bank need to send Elliot a homeownership counseling disclosure? A. Yes, because it is Elliot's principal dwelling B. No, because it is not Elliot's first principal dwelling C. No, because Elliot's reason for default makes him ineligible D. No, because Elliot has defaulted on loans before this one

The correct answer is c. 12 USC 1701x(c)(4) Outline I A

As a general rule under the Right to Financial Privacy Act, what must be provided to a bank before information can be released to the requesting party? A. A copy of the customer's driver's license, passport, or other suitable identification B. The customer's telephone number, so oral authorization to release information can be obtained easily C. A copy of the customer's written authorization to release information D. A letter from a government official requesting the information

The correct answer is c. 12 USC 3402(1) and 3404 Outline II A(1) There are many ways to legally obtain information; however of the alternatives provided, a customer authorization is the best method.

Which of the following is NOT an acceptable method of obtaining information under the Right to Financial Privacy Act? A. A request with customer authorization B. An administrative subpoena C. An informal letter D. A search warrant

The correct answer is c. 12 USC 3402(1)-(5) Outline II A There is no provision for an informal request.

A bank received a search warrant from the FBI for financial records relating to a customer. Initially what is the BEST way for the bank to handle the search warrant? A. Immediately reject it and return it to the FBI B. Mail a copy of the search warrant with the notice prescribed by the Right to Financial Privacy Act to the customer within 90 days C. Obtain a written certification from the FBI that it has complied with the Right to Financial Privacy Act D. Assemble the requested records and mail them to the bank's primary supervisory agency, which will determine whether the records can be released to the FBI

The correct answer is c. 12 USC 3403(b) Outline II B(1) If the FBI can give the bank a certificate of compliance with the Right to Financial Privacy Act, the bank can rely on it. This is the easiest way to comply.

According to the Right to Financial Privacy Act, when a call is received from the Social Security Administration requesting verification of whether an individual has an account at an institution in order to prevent a fraud from occurring, what should the employee taking the call do? A. Refuse to answer because it would be a violation of the Right to Financial Privacy Act B. Provide full information on the individual's account C. Confirm the existence of the individual's account, but provide no further information D. Tell the caller it is necessary to obtain the individual's written permission to provide any information

The correct answer is c. 12 USC 3403(c) Outline II B(4) The bank may disclose this information to the Social Security Administration to prevent fraud.

The Veterans Administration requested some information from First National Bank regarding a customer's loan records. The VA provided the bank with a customer authorization form signed by the customer on March 1. The authorization gave the VA the right to review loan records only from March 1 until June 30. The VA requested records on March 15, April 17, May 22, and June 12. The bank complied with each request and supplied the records. Has the bank complied with the Right to Financial Privacy Act? A. Yes, provided the records provided relate only to the customer's loans. B. Yes, provided the customer has the right to revoke the authorization at any time. C. No, the authorization was for too lengthy a time period. D. No, the VA is not covered by the law.

The correct answer is c. 12 USC 3404(a)(1) Outline II A(1)(c) The customer authorization can authorize disclosure for up to three months only.

In order to properly release records on the basis of a customer authorization, which of the following must the bank do? A. Make sure that statement is signed and notarized B. Record the statement in the official records of the county where the bank is located C. State that the customer may revoke the authorization at any time before the records are released D. Have the statement acknowledged by the government agency requesting the records

The correct answer is c. 12 USC 3404(a)(2) Outline II A(1)(f)

If the Department of Homeland Security requests information from a bank for purposes of combating terrorism, which of the following is true? A. The bank may require a subpoena B. The bank may inform the customer of the release of information, if asked C. The bank may request a certificate of compliance with the Right to Financial Privacy Act before providing the information D. The bank does not have to provide the information until a federal court requires it

The correct answer is c. 12 USC 3414 Outline II E The bank may require a certificate of compliance, even when the purpose of the request is to prevent terrorism

Marie Fosse has a mortgage with lender-required PMI. Her loan is covered by the Homeowner's Protection Act of 1998. On March 15, 2004, the principal on her loan was at 78 percent of the value of her home. She was 30 days past due on her loan on March 15. On July 15, 2004, her loan will be at the halfway point of its amortization schedule. On May 15 she catches up with her payments and is current on her loan at that time. Which of the following statements is true? A. The lender should have terminated the PMI on March 15. B. The lender should terminate the PMI by May 15. C. The lender should terminate the PMI by June 1. D. The lender should terminate the PMI by July 15.

The correct answer is c. 12 USC 4902 Outline II B(2) By the first day of the month after Marie becomes current after the termination date (May 15), the lender must cancel the PMI.

First National Bank opened a letter of credit in favor of ABC Co., a U.S. company, for ABC's sale of goods to Country X, a foreign country that participates in a boycott. The letter of credit contains no boycott provisions, but First National Bank knows that ABC Co. has agreed to supply a certification to Country X that ABC has not dealt with any blacklisted firms as a condition of receiving the letter of credit in its favor. What should First National Bank do? A. Implement the letter of credit because there is no boycott language on its face B. Require ABC to indemnify the bank against any potential loss for participation in a boycott C. Not implement the letter of credit D. Have the letter of credit confirmed by a bank in Country X

The correct answer is c. 15 CFR 15 CFR 760.2(f) Outline I B(5) The bank knows of an implicit condition with which ABC cannot legally comply, so it should not implement the letter of credit.

Which of the following activities of First National Bank would most likely be covered by the Fair Debt Collection Practices Act? A. Collection of consumer credit accounts that the bank originated in its consumer lending department B. Servicing of mortgage loans originated by First National and sold to investors C. Servicing of a consumer loan portfolio under contract to an investor who purchased an entire portfolio of consumer loans from a failed bank D. Collection of consumer credit contracts purchased from automobile dealers

The correct answer is c. 15 USC 1692a Outline I B(2)(a-d) The act excludes collection of a creditor's own debts, so the activities of First National's own consumer loan department would be excluded, as would the action of collecting on dealer paper if the obligation is now owned by the bank. The act also excludes collection of debts originated by the collector; therefore, activities of the bank's mortgage servicing department would be excluded if the bank originated the loans. First National's loan servicing activities are covered by the act to the extent that the loans were in default when they were obtained. If an investor purchases an entire portfolio of loans, it is likely that some will be in default at the time of purchase and the act will apply to those loans.

Which of the following actions is NOT considered abuse or harassment under the Fair Debt Collections Practice Act? A. Publishing a list of consumers who allegedly refuse to pay debts B. Using obscene, profane, or abusive language when calling a consumer C. Providing a toll-free number for the consumer to call to inquire about the debt D. Calling a consumer every hour on the hour

The correct answer is c. 15 USC 1692d Outline II A(3)

Which of the following actions is allowed under the Fair Debt Collection Practices Act? A. Sending a communication that looks like a telegram to a consumer by regular mail B. Sending a postcard to a consumer asking for payment of the past due balance C. Accepting certain postdated checks D. Requiring consumers to pay collection fees not authorized by the contract when they pay the balance of their accounts

The correct answer is c. 15 USC 1692e and 1692f Outline II B(2) A collector may accept postdated checks but if the check is postdated by more than 5 days, the collector must give the consumer at least 3 days but not more than 10 days notice before depositing. The collector also cannot deposit or threaten to deposit the check before its date. Sending postcards regarding the consumer's debt is prohibited. Also sending a communication that simulates a telegram by regular mail is deceptive. Requiring the consumer to pay any fees or interest not expressly authorized by the contract is prohibited.

Which of the following actions is illegal under the Foreign Corrupt Practices Act? A. Paying a license fee to a government to conduct business in the country B. Paying a documentation fee to a government agency for filing corporate documentation C. Paying an expedited fee to a customs agent to insure that goods will move quickly through the customs process D. Paying a fee to a governmental agency designated for police and fire protection within a city limit

The correct answer is c. 15 USC 78dd-1(d) Outline II D(2)

Which of the following is not subject to the FCPA? A. A U.S. corporation B. An Asian corporation with offices throughout the world, including in the U.S. C. A European corporation with offices only in Europe D. An employee of a U.S. corporation

The correct answer is c. 15 USC 78dd-3 Outline II C

To avoid being considered a "consumer reporting agency," the FCRA requires banks that regularly purchase dealer paper from automobile dealers to be sure that the: A. Dealer properly discloses the reasons for a denial of credit. B. Bank's name does not appear on the application or on the contract signed by the customer. C. Dealer reports to the consumer the name and address of the bank. D. Statement of disclaimer of liability is on any application for credit purchased by the bank.

The correct answer is c. 15 USC Ch 41 1681a Outline I B(5) This information must be given to the consumer in order to prevent the bank from becoming a consumer reporting agency

A compliance officer is monitoring a financial institution's credit reports for compliance with the Fair Credit Reporting Act requirements. Which of the following is NOT a permissible purpose for obtaining and using the consumer report? A. Application to open a new personal deposit account B. Annual review of a personal credit card account before issuing a renewal card C. Review of the personal credit history of a prospective customer on whom the bank officer plans to call D. Application for a commercial loan by an individual where the individual authorized the bank to investigate his credit history

The correct answer is c. 15 USC Ch 41 1681b and 604 Outline II A-F The bank cannot obtain a consumer report without a legitimate credit or employment purpose. The consumer must either apply for credit or employment, or the bank must be planning to make a firm offer of credit in order to obtain a consumer report.

In which of the following situations is the bank NOT required to report lost or stolen securities? A. When bonds were expected to be delivered in person from the local Federal Reserve Bank and were not received B. When stock traded on the over-the-counter exchange (OTC) was expected to be received through the mail from a customer's broker C. When securities with no CUSIP numbers were expected from another financial institution D. When stock traded on the New York Stock Exchange (NYSE) was expected to be delivered by the issuer's agent

The correct answer is c. 17 CFR 240.17f-1(f) Outline I C(1) Securities with no CUSIP numbers are exempt from reporting requirements. All of the other transactions described are covered.

If a bank is a government securities broker or dealer, what are its responsibilities when it obtains a Form G-FIN-4 or an MSD-4 from an employee? A. Retain the form for 10 years B. Verify the accuracy of all information on the form C. Verify the accuracy of the information by inquiring of all employers of the employee for the previous three years D. Verify the accuracy of the information by inquiring of all employers of the employee for the previous five years

The correct answer is c. 17 CFR 400.4(c) Outline II A and B

Transactions with which of the following government securities would NOT subject a bank to the registration requirements of the Government Securities Act? A. Obligations of the Farm Credit System B. GNMA securities C. U.S. Savings Bonds D. FNMA obligations

The correct answer is c. 17 CFR 401.1 Outline VIII A

A bank that is a government securities broker accepts money from a customer for the purchase of securities on Monday and does not purchase the securities by the end of the day on Tuesday. Does the bank have any responsibilities under the Government Securities Act? A. No. The bank has fulfilled its responsibilities under the Act. B. Yes. The bank must purchase the securities before the close of business on Wednesday. C. Yes. The bank must deposit the money in an account of the customer at the close of business on Tuesday. D. No. The bank has until the close of business on Wednesday to purchase the securities before being liable to the customer for failure to effect a purchase.

The correct answer is c. 17 CFR 403.5(b) Outline VII C(2) The bank has until the close of business on the day after the day the money is tendered to the bank for the purchase to actually purchase the securities. If it does not, it must deposit the money in the customer's account and notify the customer of the deposit.

For how long must a bank keep records of transactions involving currency in amounts greater than $10,000? A. Two years B. Three years C. Five years D. Seven years

The correct answer is c. 31 CFR Chapter X 1010.330(e)(3) Outline XIII L

A compliance officer is constructing a review of a transaction in which M, a deposit account customer, used cash to purchase travelers' checks in an amount of $4,000. The compliance officer must determine compliance with financial recordkeeping and currency reporting regulations. Which of the following pieces of information must be part of the bank's records for this transaction? A. M's date of birth B. M's deposit account number C. The serial numbers of the travelers' checks purchased D. The name of the branch where the transaction occurred

The correct answer is c. 31 CFR Chapter X 1010.415(a)(1)(i)(D) Outline VI B(1)

A bank is conducting due diligence for a foreign correspondent bank account. Which of the following is NOT required information? A. The identities of the correspondent bank's true ownership B. Information on the government licenses of the correspondent bank C. Copies of the tax return of the correspondent bank D. Information on the products and services the correspondent bank offers

The correct answer is c. 31 CFR Chapter X 1010.610 Interagency BSA/AML Manual Outline VIII C(2)(b)

. Mammoth Enterprises is a new customer to the bank. It is a wholly owned subsidiary of Mammoth Corporation. Which of the following statements, if true, would make Mammoth Enterprises an exempt customer at the bank? A. Mammoth Corporation is a London corporation, trading on the London Stock Exchange. B. Mammoth Corporation is a U.S. corporation with unlisted stock. C. Mammoth Corporation is a U.S. corporation trading on the American Stock Exchange. D. Mammoth Enterprises is a U.S. corporation primarily in the investment banking business.

The correct answer is c. 31 CFR Chapter X 1020.315(b)(4) Outline III B(2)(d) and (4)(h) A subsidiary of a corporation whose common stock is listed on the New York or American Stock Exchanges may be designated as an exempt person.

Which of the following customers may be exempted under Phase II of the Bank Secrecy Act? A. Government agencies B. Correspondent banks C. Payroll customers D. Businesses whose stocks are traded on a national stock exchange

The correct answer is c. 31 CFR Chapter X 1020.315(b)(7) Outline III B(2)(f) The other alternatives are all types of entities that are exempt under the Phase I rules.

Which of the following businesses would be eligible to be an exempt person under the requirements of the Bank Secrecy Act? A. Jackson's Used Cars B. Evanston Recreational Boats C. Al Williams Seafood Restaurant D. Goldsmith Aircraft Distributors

The correct answer is c. 31 CFR Chapter X 1020.315(e)(viii) Outline III B(4)(h) The other businesses listed cannot be exempted from the reporting requirements of the Bank Secrecy Act. The act and regulation prohibit the exemption of any business that sells or buys automobiles, boats, or airplanes.

Which of the following is not considered a covered borrower? A. An active member of the National Guard. B. A 20-year-old college student who is the son of an Army sergeant. C. The ex-wife of an active Navy servicemember. D. The mother of a marine serving overseas who lives with her son's family.

The correct answer is c. 32 CFR 232.3(c) Outline II A(1) The ex-wife of the servicemember is no longer a dependent, so she is not covered.

Which of the following is NOT a required disclosure for an income tax refund anticipation loan to a servicemember? A. The military annual percentage rate (MAPR). B. The annual percentage rate (APR). C. A description of each of the events of default. D. A list of all the fees included in the MAPR.

The correct answer is c. 32 CFR 232.6(a) Outline II B(2)(a) The disclosures required by a. and d. are specifically required by this regulation. The APR is required by this regulation and by Regulation Z.

Bob's wife is HIV-positive due to a blood transfusion during an appendectomy 15 years ago. She is not yet sick, but takes medication to prevent the onset of AIDS. Bob occasionally needs to take time off from work to take her for testing at Johns Hopkins in Baltimore. Because of complaints about Bob's exposure to this disease, employees have asked HR to limit his contact with them and with customers. The bank has asked Bob not to eat in the lunchroom with the other employees and has placed Bob in a position where he has limited customer contact. Does this company have any potential ADA liability? A. No. Bob's exposure to HIV could endanger other employees and customers B. No. Because the hiring manager does not know that Bob actually has HIV or AIDS, there is no liability C. Yes. Because the manager has associated Bob with this disease, the ''associated with'' rule applies D. Yes. Because the manager has regarded Bob as having a disability, he has been ''regarded as'' disabled and the ADA applies

The correct answer is c. 42 USC Chapter 126 §12102 Outline I C(2)(b)

Which of the following is a requirement in the HITECH Act for business associates? A. Encrypt all email transmissions B. Filter all internet traffic for viruses C. Implement password protocols D. Perform background checks on employees

The correct answer is c. 45 CFR 164.308 Outline II A(13)(d) Password management is a required as an administrative control.

What duty does a business associate have if it experiences a breach in security related to medical information? A. Notify the state attorney general's office B. Notify the individuals whose information could have been disclosed C. Notify the covered entity who provided the information D. Notify DHHS

The correct answer is c. 45 CFR 164.410(a) Outline II E(1) The bank is required to notify the covered entity. The covered entity has the responsibility to notify the individuals and, if applicable, the government.

In which of the following circumstances is it NOT permissible for a financial institution to obtain a consumer report from a consumer reporting agency? A. The bank requests reports on all delinquent borrowers for collection purposes B. The bank requests prescreen lists on prospective credit card applicants to solicit credit card accounts C. As an employee service, the bank requests credit reports on employees' family members for the employees' and their families' own use D. The bank obtains a credit report on prospective employees, with their consent, after the first interview but before the job offer

The correct answer is c. Fair Credit Reporting Act, Section 604 and 15 USC CH 41 1681b Outline II There are several permissible uses for the consumer report, including use in credit transactions (extending, reviewing, or collecting loans) and employment purposes. Providing consumer reports on family members to employees for other purposes without written permission of the person who is the subject of the report is a violation.

First National Bank has denied a credit application from Mr. Johnson because the application scored too low on the bank's internal credit-scoring system. Mr. Johnson's credit report, received from a credit reporting agency, scored a four out of a possible 10. Other parts of Mr. Johnson's application received low scores also. Which statement best describes First National's responsibility to Mr. Johnson under the Fair Credit Reporting Act? A. Send an adverse action notice that states the reasons the credit was denied B. Send a notice that a credit report was used C. Send an adverse action notice that states that a credit report was used and gives the name and address of the credit reporting agency D. Send an adverse action notice that summarizes the information on the credit report

The correct answer is c. Fair Credit Reporting Act, Section 615(a) and 15 USC CH 41 1681m Outline III A and B When credit is denied based wholly or partly on information contained in a consumer report, the user of the report must advise the consumer of that fact and supply the name and address of the credit reporting agency. Under Regulation B, the adverse action notice must either give the reasons for the action or explain to the applicant that he or she has the right to request the reasons.

Which of the following interest-bearing accounts is EXEMPT from Form 1099 annual information reporting requirements under IRS regulations? A. Time certificates of deposit B. Money market deposit accounts C. Individual retirement accounts D. Negotiable order of withdrawal accounts

The correct answer is c. IRC Section 3406 Outline III B(2)

Which account is NOT subject to backup withholding? A. A money market savings account owned by Brenda Wilson B. A time deposit account owned by Bob and Nancy Dawson C. An IRA owned by Max Jones D. A savings account owned by Karen Hitchings

The correct answer is c. IRC Section 3406 Outline III B(2) IRAs are subject to different withholding rules based on the customer's election.

Which of the following loans is clearly NOT subject to the IRS mortgage interest reporting requirement? A. A loan made to purchase securities, secured by rural acreage B. A loan made to finance a college education, secured by a piece of commercial real estate C. A loan made to purchase a lot on a lake, secured by a certificate of deposit D. A loan made to purchase a residence, secured by the dwelling

The correct answer is c. IRC Section 6050H(e) and Treas. Reg. Section 1.6050H-1(b)(2) Outline I B(5) The mortgage interest reporting regulations cover only loans secured by real property. Only choice (c), a loan secured by a certificate of deposit, would not be subject to the mortgage interest reporting requirement (because it is not secured by real estate).

First National Bank has foreclosed on several loans. One of the loans is not subject to the requirement to submit an information return on the foreclosed property. Which loan is most likely NOT covered by the regulations? A. A loan to Brown & Associates, a local law firm, to purchase furniture, secured by the furniture B. A loan to Mrs. Lynch to purchase stereo equipment for use in her office waiting room C. A loan to Dr. Stevens to purchase kitchen appliances D. A loan to Mr. and Mrs. Sanders to purchase a computer for their antique shop

The correct answer is c. IRC Section 6050J(b) Outline II B(2) The loan to Dr. Stevens is the most likely not to be covered. The other loans are more clearly business and not consumer loans.

On foreclosure, which of the following loans is subject to the reporting requirements for foreclosed and abandoned property? A. A loan made to purchase a family car, secured by the car B. An unsecured loan made to purchase a computer used in the borrower's business C. A loan made to purchase a residence, secured by the residence D. A loan made to purchase a home computer, secured by the computer

The correct answer is c. IRC Section 6050J(b) Outline II B(2) The requirements to report on the foreclosure and abandonment of security apply to all loans except those secured by an interest in tangible personal property that is not used by a consumer in a trade or business or for investment purposes. In these examples, the loan made to purchase the residence is the only one that is covered. The loan made to purchase the business computer is unsecured and therefore not subject to the requirements. The others are secured by tangible personal property and are not used for business or investment purposes.

Which of the following elements would NOT be a potential indicator of redlining? A. The absence of census tracts with a racial minority character within an institution's assessment area B. The presence of census tracts with a racial minority character immediately adjacent to but outside of an institution's assessment area C. A special marketing program aimed at racial minority groups within an assessment area D. Non-minority geographies that appear to have been given favorable treatment

The correct answer is c. Interagency Examination Procedures (revised 2009) Outline III C(7) An institution that implements a special marketing program aimed at racial minorities is actively encouraging loans to protected classes. This is not an indicator of redlining.

A customer calls to notify the bank that a withdrawal made at an ATM located in a local supermarket has been debited from the wrong account. The bank employee applies the point-of-sale error resolution procedures. What should the bank do? A. Ask the supermarket to credit the customer's account B. Freeze the customer's account until the problem can be resolved C. Retrain the employee to distinguish point-of-sale transactions from ATM transactions D. Provide immediate credit, and file a SAR

The correct answer is c. The employee used the wrong procedures. The ATM transaction is not a point-of-sale transaction, so the bank should first retrain the employee.

First National Bank is preparing for a regulatory examination that will include a HELOC portfolio acquired through a merger last year. The Risk Management team is reviewing internal controls, policies, and procedures to ensure the process for handling HELOC transactions meets expectations outlined in the Interagency Guidance on Home Equity Lines of Credit Nearing Their End of Draw Period. Which of the following should not be evidenced in the bank's current HELOC risk management practices? A. Detailed monthly reporting on end-of-draw exposures is provided for inclusion in ALLL estimates. B. When working with a high-risk borrower, the bank evaluates their ability to repay the loan. C. Borrowers are directed to contact the Bank's customer service team two weeks before their end-of-draw date to discuss alternative repayment options. D. The consumer lending quality assurance team performs quarterly reviews on a sample of HELOC transactions nearing their end-of draw period.

The correct answer is c. Interagency Guidance on Home Equity Lines of Credit Nearing Their End-of-Draw Periods Outline VII C(4) and C(6)(a)

Bank B is a community bank heavily involved in consumer lending. It offers overdraft lines of credit, unsecured loans to creditworthy borrowers, and installment loans secured by automobiles and other consumer goods. The senior lender at Bank B believes that loans under $1,000 are too costly for the bank and would like to prohibit loans of this size as a part of bank policy. A minimum loan amount might adversely affect low-income consumers. What should the senior lender do to exclude such loans from bank policy without creating a fair lending problem? A. Because loan minimums are not prohibited by law, the senior lender should write a policy prohibiting such loans and ensure loan officers make no exceptions. B. The lender should not set minimum loan amounts in order to remain in compliance with the fair lending guidelines. C. The bank should conduct an analysis to determine whether loans of under $1,000 are really too costly to make. If they are, the bank should then determine if there is any other way to meet the credit needs of consumers who would apply for these loans. If there is an alternative, this alternative method must be implemented. If there is no alternative, the minimum loan policy may be implemented. D. The bank should have an informal policy regarding minimum loan amounts and allow each loan officer to implement it. Without a written policy, the bank can better protect itself against fair lending problems.

The correct answer is c. Joint Policy Statement on Lending Discrimination Outline II C Because the policy has the possibility of adversely affecting a protected group, the bank should consider whether there is a business necessity for the policy. This can only be accomplished by analyzing the costs of making small loans against the income received from these loans. Only by formally analyzing the process can the bank determine whether there is a business necessity mandating the proposed policy. If these small loans are too expensive to make, the next step is to determine if there is an alternative. Perhaps applicants for small loans could be offered an overdraft line of credit for the amount because this product is already in place. Only if there is a business necessity for the policy and no less discriminatory alternatives should the policy be implemented.

Which of the following actions is NOT required of a municipal securities principal? A. Pass the Municipal Securities Principal Qualification Examination B. Complete Form MSD-4 and submit it to the bank C. Work as an apprentice for one year in a municipal securities operation D. Work in a supervisory role in a municipal securities operation

The correct answer is c. MSRB Rule G-3 Outline II A and B

State National Bank offers credit life and disability insurance on all consumer loans. This credit-related insurance is sold by a third party, but the bank collects a commission on all sales. The bank also sells hazard insurance through its affiliated insurance agency. Which of the following actions is legal for State National? A. Require all consumers to purchase credit life insurance through the bank B. Require only certain consumers to purchase credit life insurance through the bank C. Require all borrowers with real property loans to provide insurance to protect the collateral D. Require borrowers on real estate loans over $50,000 to purchase hazard insurance through the bank

The correct answer is c. OCC Advisory Letter 96-8 Outline I B The other options are all prohibited.

Which of the following endorsements is the most effective in mitigating the indemnification risk created by the changes to Regulation CC? A. A virtual endorsement with the phrase ''For mobile deposit only'' B. The signature of the payee of the check C. A signature of the payee of the check along with the phrase ''For mobile deposit only'' D. A stamp that states ''For Deposit Only'' and the account number

The correct answer is c. Outline I (D)(4) Restrictive endorsement requirement language, such as ''For remote deposit only'' or similar wording to be placed on the paper item along with other proper endorsement by the payee in order to reduce risk exposure created from the new indemnity provided

Which of the following banks CANNOT select Montana as its home state for deposit production purposes? A. ABC National Bank with its headquarters in Missoula, Montana B. XYZ State Bank, with a Montana state charter C. ACME National Bank with its headquarters in Minneapolis, MN, but with most of its branches and the majority of its loans in Montana D. Friendly Bank, a U.S. branch of a foreign bank with two U.S. locations, one in Montana and one in Wyoming

The correct answer is c. Outline I D 12 CFR 208.7(b)(3) ABC is a national bank headquartered in Montana; XYZ is a state bank chartered in Montana. Both banks must use Montana as their home state. Friendly can choose to use Montana because it is a branch of a foreign bank with more than one location. ACME must choose the state in which its headquarters are located.

The federal banking agencies have proposed an amendment to Regulation Z that would require a new early disclosure statement for loans secured by the borrower's principal dwelling. After reading the proposed change, what should the compliance professional do FIRST? A. Establish a task force to study the proposed rule. B. Contact the bank's platform software vendor to determine whether it will be ready for the change C. Prepare a summary document that outlines the effects the proposed rule would have on the bank's operations D. Train bank staff on the new rule

The correct answer is c. Outline II B and E This proposed change is important to the bank. The compliance professional should first analyze its effect and provide that summary to the affected business units, and then establish a task force to study the proposal. Contacting the vendor may be part of the risk considered by the task force. Training bank staff regarding the new rule is not appropriate until the rule is final. Proposed rules sometimes do not become final or may change with the final ruling.

A bank representative is selling insurance products in, or on behalf of, the bank. What may the representative NOT require the customer to do? A. Pre-pay a portion of the initial premium B. Complete an application for the insurance on the premises C. Obtain a medical examination for life insurance coverage D. Purchase the insurance from an affiliate of the institution

The correct answer is d. 12 CFR 208.83(a)(1); 12 CFR 14.30(a)(1); 12 CFR 343.30(a)(1), 12 CFR 136.30(a)(1) Outline II A(1) Requiring the purchase from the bank or an affiliate is not permitted.

ACME National bank uses telephone solicitations to sell its debt cancellation contracts. The banker explains to the borrower the nature of the contract, gives an oral short form disclosure, receives the customer's affirmative election orally, and sends the written long form disclosures and written affirmative election within three business days. Is the bank in compliance with the telephone solicitation rules as they apply to affirmative elections? A. Yes, the bank has fulfilled all of its requirements. B. No, oral affirmative elections are not acceptable. C. No, the bank also must give the customer 30 days to cancel the contract. D. No, telephone solicitations are not allowed for debt cancellation contracts.

The correct answer is c. Outline II E 2(c) 12 CFR 37.7 Oral affirmative elections are acceptable forms of agreeing to a debt cancellation contract; however, the disclosures must be given orally and in writing; the election must be given orally and in writing, and the customer must be allowed to cancel the contract within 30 days.

A compliance professional is a member of the task force studying how the bank can reduce customer complaints about holding deposits. One proposed solution involves purchasing an expensive system that will reduce the number of holds placed by evaluating the customer's history and relationship with the bank. Which of the following roles is MOST important for the compliance professional on the task force? A. Developing training for tellers who will use the new system B. Setting parameters for what the system should review to determine the strength of the customer relationship C. Validating the system to ensure it complies with regulatory restrictions D. Conducting a cost-benefit analysis to determine if the system is the best solution

The correct answer is c. Outline III D The compliance professional's role on a task force is to provide knowledge about compliance risk, such as whether the system is in compliance with relevant laws and regulations. The training, parameters, and cost-benefit analysis are more operational in nature.

Which of the following bank products is NOT subject to the disclosure provisions of the Interagency Statement on Retail Sales of Nondeposit Investment Products? A. Fixed-rate annuities B. Variable-rate annuities C. Variable-rate savings accounts D. Mutual funds

The correct answer is c. Outline Interagency Statement I B The savings account is a deposit; the guidance only applies to nondeposits.

Under the Interagency Statement on Retail Sales of Nondeposit Investment Products what disclosure must the bank's investment sales representative make to the customer? A. The bank's regulatory agency B. The sales commission resulting from the investment purchase C. That the investment product is not guaranteed by the bank D. The arbitration procedure for resolving disputes over investment advice

The correct answer is c. Outline Interagency Statement II A(2)(b) This is the only answer choice that is a required disclosure.

Under the Interagency Statement on Retail Sales of Nondeposit Investment Products, what may a bank teller do? A. Discuss the past performance of a bank-related mutual fund B. Transfer mutual fund shares from an investment savings account to an IRA account C. Take the business card of a customer who has asked to purchase a bank related mutual fund and give it to a licensed representative D. Assist a customer in determining eligibility to purchase a bank-related mutual fund

The correct answer is c. Outline Interagency Statement II B(4)(c) and (d)

First State Bank has implemented an overdraft protection program that it calls "bounce protection." This feature will be applied to all consumer checking accounts. Which of the following practices is considered a best practice? A. In its advertisements for the checking account, the bank states, ''Free Bounce Protection—we pay all of your bounced checks'' B. In its product description given to new customers the bank states that the bounce protection is required on all free checking accounts C. The bank trains its new accounts personnel to explain that if the consumer needs money the bank has a range of consumer loan products D. The available account balance shown on the Internet and ATMs includes the amount of unused overdraft protection

The correct answer is c. Outline V A(2) Joint Guidance

A bank has a large mortgage department as well as a high HMDA error rate. An expensive software program could automate the process, but the business unit manager does not want to purchase the software because of its expense. Though it is not as efficient, the manager prefers to make some improvements to the manual process, add some more robust monitoring procedures, and opt not to purchase the software. What should the compliance professional do? A. Elevate the issue to a higher authority to force the mortgage department unit to purchase the software B. Nothing; the compliance professional's job is done with the completed research C. Document the fact that the level of risk present with manual systems is acceptable to the mortgage department business unit D. Write a memo to the president of the bank that explains the risk assessment for this area

The correct answer is c. Outline introduction and II B(2) The job of the compliance officer is to assess the risks and inform management of those risks. The business unit can decide what level of risk to accept. If the high level of HMDA errors continues, even with the improved procedures, the problem can be escalated and brought to senior management's attention.

First National Bank owns a data processing company that sells financially related data processing services to various businesses in the community. Daniel Tyler, a loan officer, is negotiating a loan to a local CPA firm. He would like to make the loan conditional on the CPA firm's use of the subsidiary data processing firm. May he do so? A. Yes, because it is not a bank service. B. Yes, because it is not related to pricing. C. No. It is an illegal tie-in. D. No, unless the company was planning to obtain a new data processing service provider anyway.

The correct answer is c. Section 106(b)(1)(B) of the Bank Holding Company Act Outline III A No loan can be conditioned on the borrower obtaining services from a bank subsidiary.

Mills Company, Inc., is a manufacturing company with a working capital line of credit from First National Bank. The credit agreement governing the loan states that Mills cannot obtain additional unsecured credit without the approval of the bank. Mills believes that such a clause violates the Bank Holding Company Act's anti-tying clause. Does it? A. Yes. It is a restraint of trade. B. Yes, unless the bank will reasonably allow additional credit at Mills' request. C. No, since this clause relates to the soundness of the credit D. No, unless the bank refuses to grant additional credit to Mills itself

The correct answer is c. Section 106(b)(1)(E) of the Bank Holding Company Act Outline III A(1)(e) Banks may not extend credit, lease or sell property, furnish services, fix, or vary consideration conditioned on the customer not obtaining credit or services from a bank competitor unless imposed to assure soundness of the credit.

What should a compliance manager do FIRST to implement the third-party joint marketing agreement as required by the Privacy of Consumer Financial Information regulations? A. Notify the third party of the institution's opt-out policy B. Obtain approval of the board of directors prior to entering into a third-party contract C. Review the requirements for third-party joint marketing agreements and make certain the requirements are included D. Request a written statement from the third-party provider that certifies compliance with the regulation

The correct answer is c. This step is necessary before having the board approve an agreement, or requesting information from the third party.

For a U.S. bank with domestic and foreign locations, which transaction does NOT require an information return to report the amount of interest paid? A. A loan made to James Roberts, a U.S. resident, payable at the bank's New York office, to purchase securities secured by the borrower's home in Mexico B. A loan made to Robert and Louise LeBlanc, who are resident aliens, payable at the bank's New York office, secured by a piece of real property located in Canada C. A loan made to Smith and Withers, a partnership formed for the practice of law, located in the United States, payable at the bank's New York office, guaranteed by Mr. Smith and Mr. Withers, and secured by the law firm's office building D. A loan made by Mrs. West, a U.S. citizen, to purchase a mobile home and the lot on which it will be placed; both the mobile home and lot are located in the United States

The correct answer is c. Treas. Reg. Section 1.6050-H-1(b) and 1.6050H-1(d)(2) Outline I B(3) and (5) Loans secured by real property and payable at a bank location within the United States are covered by the regulation if they are made to individuals. If the property is located outside the United States, the borrower must be a U.S. citizen or a resident alien individual for the property to be covered. Therefore, interest paid on all of the loans described is subject to the reporting requirements except (c). The loan to the law firm is not covered because it is not a loan to an individual.

Mrs. Franklin has two mortgage loans at First National Bank on which she makes monthly payments. On Loan A she made 13 payments last year, mailing the last payment on December 28. It was received the afternoon of January 2 and credited on January 3. The amount of interest paid on Loan A in the first 12 payments was $1,000. There was $155 of interest on the 13th payment. On Loan B, she made 12 payments; each contained interest accrued to the fourth day of the month. The last payment was mailed on December 19 and was received and credited on December 23. The last payment contained interest accrued to January 4. The total interest paid on Loan B was $2,000, of which $100 accrued between January 1 and January 4 of the next year. How much interest must First National Bank report? A. $1,155 for Loan A and $2,000 for Loan B B. $1,155 for Loan A and $2,100 for Loan B C. $1,000 for Loan A and $2,000 for Loan B D. $1,000 for Loan A and $2,100 for Loan B

The correct answer is c. Treas. Reg. Section 1.6050H-1(e)(2) Outline I C A lender should report the interest received or properly accrued during the calendar year. Therefore, if the payor makes a payment that is not received until the next year, it is not reported until the year it is received. However, under the de minimis rule, any interest received that properly accrues up until January 15 of the next year may be reported in the current calendar year.

If the lender is subject to the mortgage interest reporting requirement, which of the following actions is NOT required? A. The lender must file an information return with the IRS. B. The lender must report the amount of interest and points on the information return. C. The lender must report the loan balance as of December 31 of the year preceding the year the report is filed. D. The lender must send a statement to the borrower.

The correct answer is c. Treas. Reg. Section 1.6050H-2(a)(1) and 1.6050H-2(b), and IRC Section 1.6050H(b) Outline I C The loan balance is not information that is required to be reported.

Which of the following pieces of information is the bank NOT required to report on Form 1099 for foreclosed and abandoned property? A. The name, address, and TIN of the borrowers B. A description of the property C. The original loan amount D. Whether the borrower is personally liable for the debt

The correct answer is c. Treas. Reg. Section 1.6050J-1T A-26 and A-27 Outline II D IRS Form 1099-A requires the loan amount outstanding at the time of foreclosure.

Which of the following is true of the requirements for overdraft services as regulated in 12 CFR 1005.17? A. Institutions can cancel an individual consumer's overdraft service at any time B. The consumer can provide affirmative consent via telephone C. There are no rules on how much an institution can charge for overdraft services D. A prescribed notice must be sent to the consumer to opt in to overdraft services

The correct answer is d. 1005.17(d)

With one exception, the following transactions are considered electronic funds transfers for purposes of Regulation E. Which transaction is NOT considered an EFT? A. Withdrawing cash from a checking account through an ATM B. Paying for groceries through a point-of-sale debit of funds from a checking account C. Transferring funds from a savings account to a checking account at an ATM D. Transferring funds from a savings account to a checking account by the customer's telephone call to a bank officer and asking for the funds to be transferred

The correct answer is d. 12 CFR -1005.3(b) and 1005.3(c)(6) Outline I A through D All of the choices listed are covered by Regulation E except the transfer of funds initiated by a telephone call from the consumer to the bank.

Bank A offers a special senior citizen deposit package of benefits that includes free checks, free travel agency services, and a credit card with no annual fee. Bank A generally charges a $25 annual fee for its credit card. The senior citizen deposit package is available to all persons who are at least 55 years of age. There are no income requirements, but there is a minimum deposit balance requirement. Are there any fair lending violations in this practice? A. No. Provided Bank A does not have any income requirements, there is no disparate impact on the community. B. No. Even though there is an age requirement, provided elderly persons are treated more favorably, there is no violation of law. C. Yes. Because Bank A has a minimum deposit requirement, there is a disparate impact on low-income consumers. D. Yes. The age requirement constitutes age discrimination and is not legal under the ECOA.

The correct answer is d. 12 CFR 1002.4 and 12 CFR 1002.6(b)2 Outline I B(2) Regulation B allows creditors to treat elderly applicants (applicants who are 62 years of age or older) more favorably. Bank A's program favors persons who are too young (i.e., between age 55 and 61). Because age is a prohibited basis under the ECOA, the program does not meet the fair lending requirements.

ABC Bank has an interactive Internet Web site at which it takes consumer credit applications. At the time an applicant completes an application on the Web site and submits it, the applicant also is asked for his or her email address. If the application is denied, ABC sends an adverse action notice to the applicant's email address listed on the application. Using this procedure, what is ABC Bank's responsibility? A. Post the notice on its Web site also B. Send a paper notice by regular mail also C. Use a credit scoring system D. Obtain the applicant's affirmative consent before sending the notice

The correct answer is d. 12 CFR 1002.4(2) Outline II A(4)(c)(i) The creditor must obtain the applicant's affirmative consent before sending disclosures.

Cassandra Phillips requested a loan to purchase a boat. She asked for $15,000 at 7.5 percent for seven years. The bank considered her request but decided, considering her income and credit history, the best offer of credit the bank could make was $10,000 at 8.25 percent for five years. Rhonda Mays, the loan officer, wrote a letter, setting forth the terms the bank could offer. The letter was mailed on July 1. Ms. Phillips received the letter and began to look elsewhere for a loan on the terms and conditions she wanted. Does the bank have any additional responsibility to Ms. Phillips? A. No. Because the bank made the offer of a loan, there is no further responsibility. B. No. Because the customer decided to look elsewhere, there is no further responsibility. C. Yes. The bank must follow up with a phone call to determine if Ms. Phillips is still interested. D. Yes. The bank must send an adverse action notice because Ms. Phillips did not take the bank's counteroffer.

The correct answer is d. 12 CFR 1002.9(a)(1)(iv) Outline II F(2)(a)(iv) A creditor must send an adverse action notice within 90 days after notifying the applicant of a counteroffer if the applicant does not expressly accept or use the credit offered. However, a creditor that gives the applicant a combined counteroffer and adverse action notice need not send a second adverse action notice if the applicant does not accept the counteroffer.

First National is subject to HMDA reporting. Which of the loans listed below would be reported on its HMDA LAR? A. A new home equity line of credit made to Mr. B to improve his house B. A loan made to a business to improve 20 affordable housing units in an apartment building C. A construction loan made to build a principal dwelling D. Both a and b

The correct answer is d. 12 CFR 1003.1(c); 1003.2(p); 1003.3(c) Outline II(A)(3) and (4)

Of the following, which loan or application is EXCLUDED from HMDA reporting? A. A loan secured by a dwelling that is made for a consumer purpose other than home purchase, home improvement or refinancing B. A loan secured by a multi-family property that is made for a business purpose of renovating the property C. An application secured by and for the purpose of refinancing a home when there is no increase in principal D. None. All are reportable

The correct answer is d. 12 CFR 1003.1(c); 1003.2; 1003.4(a)(3) Outline III(A) The regulation requires an institution to report data about all loans secured by a dwelling.

Which of the following is EXCLUDED from HMDA reporting? A. An application that was approved and then withdrawn by the applicant B. A loan secured by a houseboat C. An application for refinancing where the proceeds will be used to pay for college D. None. All are reportable

The correct answer is d. 12 CFR 1003.1(c); 1003.2; 1003.4(a)(3) and (38) Outline II(A) and (D) An institution reports all consumer loan purposes if the loan or application is dwelling secured. In addition, business purpose applications and loans are reported if they are for the purpose of home purchase, refinancing or home improvement.

HMDA purposes, the term "dwelling" does NOT include which of the following? A. Mobile home park B. Single family residence C. Individual condominiums D. Hotel

The correct answer is d. 12 CFR 1003.2 Outline II(E)(2)and (3)

Which type of loan transaction is NOT covered under the HMDA reporting requirements? A. A loan secured by a multifamily dwelling B. An unsecured home improvement loan C. A loan to purchase a residential lot D. Both b and c

The correct answer is d. 12 CFR 1003.3(c)(2); 1003.1(c) Outline II(A) Neither unsecured home improvement loans nor loans on unimproved land are covered transactions. As of January 1, 2018, HMDA coverage requires a lien on a dwelling.

In a review of a bank's home mortgage loan application register, which of the following must be included? A. Loans made or purchased in a fiduciary capacity B. Servicing rights purchased C. Interim construction loan applications D. Loans made, purchased and sold within the reporting period

The correct answer is d. 12 CFR 1003.3(c)(5) Outline II (D) (4), (12), and (14) All of the loans described are excluded from coverage except for loans made, purchased and sold within the reporting period.

First National is subject to HMDA reporting. On which of these loans does First National have to report the interest rate on its HMDA LAR? A. A loan to renovate a vacation property, secured by the property B. A loan to purchase a home for the borrower's son, secured by the property C. A home improvement loan secured by a principal dwelling D. All of the above

The correct answer is d. 12 CFR 1003.4 Outline III(B)(17)(25) As of 1/1/18, lenders must report the interest rate on HMDA-reportable loans. Both the rate spread and the interest rate are required.

Under HMDA rules, what is the threshold for reporting the interest rate spread for first lien mortgage loans? A. Equal to or greater than 1.5 percentage points B. Equal to or greater than 5 percentage points C. Equal to or greater than 7 percentage points and when the loan is subject to the Home Ownership and Equity Protection Act D. There is no threshold for reporting

The correct answer is d. 12 CFR 1003.4(a)(12) Outline III(B)(17)

Which one of the following types of data is NOT required to be reported for each originated loan application subject to Regulation C reporting requirements? A. Purpose of the loan B. Race, ethnicity, and sex of the applicant C. The interest rate on the loan D. None of the above. All must be reported

The correct answer is d. 12 CFR 1003.4(a)(21) Outline III (B)(4),(13), and (25) Lenders are required to report all of the data elements listed including interest rate.

When does a notice that the borrower's property is located in a special flood hazard area have to be given to the borrower? A. Before making a commitment to lend B. Within 10 days after closing C. At the time of the application D. Within a reasonable time before completion of the transaction, but no later than the bank sends other notices concerning insurance or taxes

The correct answer is d. 12 CFR 22.9(c), 12 CFR 339.9(c), 12 CFR 208.25(i)(2), and 12 CFR 172.9(c) Outline II B(6)

If provisional credit is made to a customer for an alleged error on an ATM cash withdrawal, Regulation E requires a bank to determine whether an error has occurred and to notify the customer NO LATER THAN how many days after the bank receives notice of the alleged error? A. 10 business days B. 10 calendar days C. 45 business days D. 45 calendar days to investigate plus three business days to notify the customer

The correct answer is d. 12 CFR 1005.11(c)(2) Outline II C(4)(b) Forty-five days is the longest amount of time a financial institution can take to conduct research and make a conclusion about an alleged unauthorized transaction. There are three exceptions to this rule: when the account is new, when the transaction did not take place within a state, and when the transaction involved a debit card in a point-of-sale transaction.

First National Bank investigated Mr. Gilberts allegation of a $500 EFT error. The bank provisionally credited the account during the investigation. The bank determined that no error was made and notified Mr. Gilbert on April 5 of the results of the investigation. On April 6, the bank debited Mr. Gilberts account for $500, which before this debit had a balance of $700. On April 7, checks for $600 and $800 are presented for payment against the account, payable to third parties. On April 8, Mr. Gilbert comes into the bank to withdraw $100. What should First National do? A. Return both the $600 and the $800 checks and honor the cash withdrawal B. Pay both checks and honor the cash withdrawal C. Pay the $600 check and honor the cash withdrawal D. Pay the $600 check and refuse the cash withdrawal

The correct answer is d. 12 CFR 1005.11(d)(2) Outline II C(4) The bank must honor checks payable to third parties for five business days after the transmittal of the notice of the investigation. The bank does not have to honor checks that would not have been paid if the debit had not occurred. Therefore, the $800 check would not be paid. Because the $600 check would have been paid but for the debit of the $500, the bank must pay the $600. The $600 check the bank does have to pay now overdraws the account by $400. (Remember, the account has a real balance of $200.) The bank, therefore, does not have to honor a cash withdrawal—there are no funds in the account and only checks payable to third parties fall under this rule.

Alicia Perez telephoned the customer service department at First National Bank and requested to have $300 debited from her account and sent to her sister in Peru three days later. Which of the following alternatives best states the banks responsibilities to Ms. Perez? A. Provide a written prepayment disclosure and receipt to Ms. Perez as soon as possible, but before the transfer is made B. Provide a written prepayment disclosure within one business day of the request; a receipt is not required C. Provide an oral prepayment disclosure at the time of the request D. Provide an oral prepayment disclosure at the time of the request and the receipt information on the next account statement

The correct answer is d. 12 CFR 1005.31(e)(2); 12 CFR 1005.31(g)(2) Outline II H 2(d) and H(6) When the entire transaction is conducted orally by telephone, a prepayment disclosure may be provided orally (but must be in the language in which the sender conducts the transaction). If the transaction is conducted solely by phone and the funds are debited from the sender's account at the institution, the receipt may be provided on the next periodic statement.

In which of the following cases must a furnisher of consumer information investigate the dispute? A. A dispute submitted by a credit repair company on behalf of one of the furnisher's customers B. A dispute submitted by one of the furnisher's customers on a form supplied by a credit repair company C. A dispute about a charged off loan for which the consumer refused to provide his social security number D. A dispute about a delinquent account that has been previously submitted but upon which the furnisher took no action

The correct answer is d. 12 CFR 1022.43 (f) Outline VI F(4)(b) and (c) and F(5) A furnisher can consider a dispute to be a frivolous dispute if it does not include sufficient identifying information, such as a social security number, it is submitted by a credit repair company or on a form by a credit repair company. Disputes that have been submitted previously can be considered to be frivolous if the furnisher investigated the dispute when it was previously submitted.

Which of the following methods is NOT valid for determining which consumer borrowers should receive a risk-based pricing notice? A. The credit score proxy method B. The direct comparison method C. The tiered pricing method D. The comparative file method

The correct answer is d. 12 CFR 1022.72 Outline III G(1)(c), (2) and (3) The direct comparison method is used when the lender directly compares borrowers to other similar borrowers in the portfolio to determine who receives a notice. The credit score proxy method is used when a lender derives a cutoff credit score where at least 40% of its borrowers fall above the cutoff and 60% below the cutoff. Borrowers below the cutoff receive notices. The tiered pricing method allocates notices to borrowers in the higher pricing tiers.

A bank proposes to pay a $50 referral fee to bank employees for referring home mortgage loan applicants to an affiliated mortgage company by providing a mortgage application and an Affiliated Business Arrangement disclosure. What does RESPA permit that makes this practice acceptable? A. A mortgage affiliate can reimburse the bank for referral fees paid to bank employees for an originated loan Incorrect B. A mortgage affiliate can reimburse the bank for referral fees paid to bank employees if an Affiliated Business Arrangement disclosure is approved C. A bank can pay nominal referral fees to its own employees because a bona fide service is being performed based on an application being provided D. A bank can pay referral fees to its own employees when an Affiliated Business Arrangement disclosure is provided

The correct answer is d. 12 CFR 1024.14(b) and (g)(vii) Outline II C(3)(g) An institution may pay referral fees to its own employees.

What explanation should a bank's Affiliated Business Arrangement disclosure statement include? A. A consumer's rights to file a complaint with HUD against the lender Incorrect B. The mortgage services dispute resolution procedures under RESPA C. The Computer Loan Origination (CLO) system D. The nature of the relationship between the referring party and the service provider

The correct answer is d. 12 CFR 1024.15(b) Outline II A(3)(c)(i)

First National Bank's mortgage department has a large escrow operation for taxes and insurance. At closing what may the bank require of the borrowers? A. Pay all taxes due plus one full year of taxes in advance B. Pay only the taxes due on the date of the closing Incorrect C. Pay the taxes due plus one-twelfth of the amount owing for the next year D. Pay all taxes due plus one-sixth of the amount owing for the next year

The correct answer is d. 12 CFR 1024.17(3)(c)(i) and 1024.17(5) Outline II F(5)

As of April 20, 2018, which of the following statements regarding successors in interest are not true? A. A confirmed successor in interest will generally be treated like a borrower in the servicing of the mortgage. B. A successor in interest includes a person to whom an ownership of a property securing a mortgage has transferred as a result of a divorce decree. Incorrect C. A mortgage servicer must promptly facilitate communication with a potential successor in interest upon receiving notice of a death of a borrower. D. A confirmed successor in interest is liable for the mortgage.

The correct answer is d. 12 CFR 1024.32(c)(1) Outline II E(12)(b) Unless the successor in interest assumes the mortgage loan obligation under State law, the successor in interest is not liable for the mortgage debt and cannot be required to use the successor in interest's assets to pay the mortgage debt, except that the lender has a security interest in the property and a right to foreclose on the property, when permitted by law and authorized under the mortgage loan contract

Acme Mortgage has filed a foreclosure action on the property securing John Doe's mortgage. The foreclosure sale will be held in 120 days. If Acme receives an application for a loss mitigation option from Mr. Doe 100 days from the foreclosure date, which of the following actions must Acme take? A. Withdraw the foreclosure action within 30 days of the receipt of the application B. Notify the borrower of the decision on the completed application within 14 days of the receipt of the application Incorrect C. Notify the borrower of any missing information within 10 days of the receipt of the application D. Acknowledge the application in writing within 5 days of receipt of the application

The correct answer is d. 12 CFR 1024.41(b)(2)(i) Outline II E(11)(b)(i)

First National Bank has a mortgage lending department that finances conventional mortgage loans and construction loans for individuals. • Loan A is a loan to Mr. Jones for purchase of a lot and temporary construction financing for his home. The term of Loan A is nine months. Once the home is built, Loan A will be paid by the funding of a new permanent mortgage to Mr. Jones. First National has no commitment to Mr. Jones to fund the permanent loan. • Loan B is made to Mr. and Mrs. Williams, also for the construction of a home. Loan B is structured so advances will be made on the loan for nine months, the expected construction period. At the end of that time, Loan B will automatically convert to a permanent mortgage. • Loan C is a loan to Mr. and Mrs. Danvers for the purchase of a home that will be used as a rental property. The loan will be secured by the home. Which of these loans is covered by RESPA? Incorrect A. Loan A B. Loan B C. Loan C D. Loans A and B

The correct answer is d. 12 CFR 1024.5(b)(2) and (3) Outline I D(1) and I (D)(2) An interim construction loan is covered by RESPA if the loan also covers the transfer of title to the first user. Therefore, Loan A is covered. Loan B will convert to a permanent loan and is a RESPA transaction. Loan C is made to individuals for the purpose of acquiring rental property (a business purpose loan) and therefore is not covered by RESPA.

When must a notice be received from a consumer in order to be considered a "billing error notice"? A. Within 30 days after the transaction that is the subject of the alleged error B. Within 90 days after the first statement that reflected the error C. Within 60 days after the transaction that is the subject of the alleged error D. Within 60 days after the first statement that reflected the error

The correct answer is d. 12 CFR 1026.13(b)(1) Outline VIII J(3)

What must a married couple do to waive their right of rescission on their residential property? A. Call the bank's toll-free telephone number B. Obtain the loan officer's written approval C. Sign the bank's standard waiver form D. Sign a written statement indicating the reason for the waiver

The correct answer is d. 12 CFR 1026.15(e) and 1026.23(e) Outline IV D(7) and VIII(G)(7) In order for a waiver of the right to rescind to be effective, all parties with the right to rescind must sign it, and it must describe the reason for the waiver.

On January 10, ABC Bank decides to send an advertising piece to consumers in its local community to promote its home equity lines of credit. The ad will be sent via email. The bank's home equity product has an interest rate based upon the national prime rate plus a five percent margin. However, the bank is offering a lower promotional interest rate that is fixed for six months. In the ad, the bank plans to disclose the promotional rate and the fact that it is valid for six months from the date of loan closing. The bank will also disclose an actual APR charged on this product during the previous November. Additionally, the ad will include a list of all the fees required to close the loan and the maximum APR that can be charged under the plan. Will this ad meet TILA requirements? A. Yes, all required disclosures have been made. B. No, the ad must include the fact that a security interest will be taken on the consumer's home. C. No, the ad must include the specific index and margin upon which the rate is based. D. No, the ad must disclose a rate used during the 30 days before the date the ad is transmitted.

The correct answer is d. 12 CFR 1026.16(d)(2) and 12 CFR 1026.16(d)(6)(i)(a) (Official Staff Commentary) Outline VIII O(6)(f) The rate must be ''reasonably current.'' For an emailed ad, ''reasonably current'' is a rate in effect during the 30 days before the transmission of the email.

Which of these transactions requires the earliest disclosure? A. A $60,000 loan with a variable interest rate to purchase part of a municipal bond issue B. A $15,000 unsecured closed-end loan with a fixed interest rate to build a swimming pool at the borrower's residence C. A $150,000 loan with a fixed interest rate to purchase a residence secured by the residence D. A $200,000 loan with a variable interest rate to purchase a residence secured by the residence

The correct answer is d. 12 CFR 1026.19(b) Outline VI B An adjustable rate mortgage (ARM) program disclosure must be given at the time of the application when the loan will be made to purchase the borrower's principal dwelling and will have a variable interest rate. The $60,000 loan to purchase part of a municipal bond issue with variable interest rate is not a covered transaction because it is more than $55,800 (as adjusted annually) and is not secured by real estate. The $15,000 unsecured loan to build a swimming pool at the borrower's residence with a fixed interest rate only requires disclosures before consummation. The $150,000 loan to purchase a residence with a fixed interest rate requires the first disclosure to be made within three business days of the application.

Which of the following elements is NOT required to be in a repurchase agreement between a bank that is a government securities dealer and a counterparty? A. A statement that the funds are not insured by the FDIC B. A list of the specific securities that are the subject of the agreement C. A provision for substitution of securities if they can be substituted D. A statement that the bank is a regulated government securities dealer

The correct answer is d. 17 CFR 450.4 Outline VII C(5)

Which of the following closed-end loans is subject to the right of rescission? A. A loan to purchase a vacation home, secured by the vacation home itself B. A loan to purchase a principal residence, secured by the residence C. A loan to purchase furniture for use in a principal dwelling, secured by the furniture D. A home improvement loan for the borrower's principal dwelling, secured by the dwelling

The correct answer is d. 12 CFR 1026.23(a)(1) and (f) Outline IV D(1) In any transaction where a security interest will be taken in a consumer's principal dwelling and where the loan is not exempt under 1026.23(1)(f), each consumer with an ownership interest in the home has the right to rescind the transaction. The loan to purchase a vacation home secured by the vacation home and the loan to purchase furniture are not covered because they do not involve the consumer's principal dwelling. The loan to purchase a principal residence secured by the residence is exempt because it is a residential mortgage transaction, meaning it is used to purchase or construct the dwelling.

For how long must a lender retain evidence of compliance with the Truth in Lending Act? A. One year following consummation of the transaction for all transactions B. Twenty-five months from the date of the application, except for mortgages, which have a five year retention requirement C. Six months from the date the loan is repaid, except for mortgages, which have a five year retention requirement D. Two years after the disclosures are required to be made, except for mortgages, which have a five-year retention requirement

The correct answer is d. 12 CFR 1026.25 Outline XIV

A creditor receives a phone application for a home equity line of credit. Before the time period for mailing out the early disclosure and the Regulation Z-mandated brochure, the creditor reviews the applicant's credit history and discovers the applicant will not qualify for the line of credit due to a bankruptcy filing last year. Which of the following BEST describes how Regulation Z treats this situation? A. The creditor may wait and send the early disclosures and brochure with the adverse action letter required by Regulation B. B. The early disclosures and brochure must be sent out within the required time period after receipt of the telephone application, even if the loan is declined within that period. C. If the credit denial was made within 30 days after receipt of the telephone application, the creditor does not have to send the early disclosures and brochure. D. If the credit denial was made within the period of time Regulation Z allows for mailing the early disclosures and brochure, the creditor does not have to send the early disclosures or the brochure.

The correct answer is d. 12 CFR 1026.40(b) Official Staff Commentary Outline VIII F(2) If the bank determines that the application will be denied within the three business days and notifies the applicant, the early disclosures are not required.

Which of the following statements is true regarding the requirement that a creditor determine a borrower's ability to repay the loan? A. Applies only to loans secured by the consumer's principal dwelling B. Applies only to higher-priced mortgages C. Applies to HELOCs D. Applies to all closed-end dwelling-secured loans

The correct answer is d. 12 CFR 1026.43 (a) and (c) Outline VII G(1)

If a bank is charging a premium rate in a credit card solicitation, how must it disclose this rate? A. In bold type and underlined B. In a different color ink C. In a different font D. In 16 point type

The correct answer is d. 12 CFR 1026.60(b)(1)(iii) Outline VIII H(5)(e)

To which of the following potential customers would First National Bank have to make available a Regulation DD account disclosure? A. National Lumber Company (a local corporation) B. Rogers and Rogers (a law firm in the form of a partnership) C. John Jones, DBA Jones Consulting Company (a sole proprietorship) D. Eva Gilcrest, POD (payable on death) to Jane Gilcrest

The correct answer is d. 12 CFR 1030.2(a) Outline I B The Truth in Savings Act (and therefore Regulation DD) applies only to natural persons who open an account for other than business purposes. In this case, because both the party opening the account and the beneficiary of the funds are consumers, the account is covered.

Which of the following does NOT require a Truth-in-Savings Act disclosure? A. An individual holding the account for personal, family, or household purposes B. Holders of IRA and SEP accounts when invested in covered accounts C. Holders of accounts under the Uniform Transfer to Minors Act D. Accounts established for unincorporated, nonbusiness associations

The correct answer is d. 12 CFR 1030.2(a) and (h) Outline I B

First National Bank is giving away gifts with all new certificates of deposit over $5,000. How must a portable stereo worth $250 be treated on the account disclosure? A. It is a bonus and, therefore, is considered to be interest and does not have to be disclosed on the account disclosure. B. It is interest and must be included in the simple interest rate on the account disclosure. C. It is neither a bonus nor interest and does not have to be disclosed on the account disclosure. D. It is a bonus, and not interest, and must be disclosed on the account disclosure.

The correct answer is d. 12 CFR 1030.2(f) and (n), and 12 CFR 1030.4(b)(7) Outline II B(1)(b)(xi) Gifts are bonuses, not interest. The amount or type of bonus, when the bonus is provided for any minimum balance or time requirement, must be disclosed in account disclosure statements.

Of the following statements that describe the requirements of Regulation DD, which statement is true? A. The act requires the bank to begin accruing interest on interest-bearing accounts no later than the second business day following the day of deposit. B. The act requires the bank to compound interest no less than monthly. C. The act requires the bank to send periodic statements on all accounts no less than quarterly. D. The act requires the disclosure of all fees imposed during the statement period in connection with the account on any periodic statement.

The correct answer is d. 12 CFR 1030.6(a)(3) Outline II B(4) This is the only true statement. TISA does not prescribe a particular frequency of compounding interest, nor does it mandate that periodic statements be sent. Interest must begin to accrue no later than prescribed by the Expedited Funds Availability Act.

A financial institution will be in compliance with the blocking requirements of Regulation GG if: A. It monitors debit card transactions to block any Internet gambling transactions B. It notifies all customers that Internet gambling transactions are illegal C. It restricts transactions to accept only those not originated on the Internet D. It relies on compliance procedures implemented by the payment system operator

The correct answer is d. 12 CFR 233.5(b) Outline II A(2) Financial institutions may rely on the policies and procedures of payment systems that are reasonably designed to block prohibited transactions.

ABC Bank's Internet Web site has the following statement on the home page: "You won't believe our sky-high CD rates. Rates start at 1.5 percent." This statement has a link next to it that takes the viewer to another page with the following information: • Minimum to open the account: $25,000 • Substantial penalty for early withdrawal • Principal compounded monthly • APY = 1.65 percent One of these pieces of information must appear on the home page. Which one must be on the same page as the advertisement? A. Minimum to open the account: $25,000 B. Substantial penalty for early withdrawal C. Principal compounded monthly D. APY = 1.65 percent

The correct answer is d. 12 CFR 1030.8 (b) and Commentary Outline II D(6) The other required disclosures may be linked to the triggering term without being in the same location. However, the consumer must be able to view the APY and interest rate simultaneously.

Which of the following accounts is subject to reserve requirements? A. A savings account owned by an individual B. An IRA account C. A time deposit owned by a trust for an individual D. A checking account owned by an individual

The correct answer is d. 12 CFR 204.-3 (a)(b) and (c) Outline IIIC(4) Nonpersonal time deposits, IRAs, and Keoghs are not reservable. Time deposits where the entire beneficial interest is owned by an individual are also not reservable.

Which one of the following items is NOT eligible as a form of reserves? A. Vault cash B. Balance maintained with the Federal Reserve Bank C. Pass-through account maintained at a member bank D. Government securities

The correct answer is d. 12 CFR 204.5 Outline III B Government securities are not eligible as a form of reserves.

Which of the following sources is the least desirable to use when monitoring a correspondent bank's capital? A. A national rating agency's report on the correspondent bank B. The correspondent bank's own call report C. The correspondent bank's annual report to shareholders D. A national newspaper's story on the correspondent bank's financial condition

The correct answer is d. 12 CFR 206.3(c)(2) Outline II B(3) Banks are allowed to use information from the correspondent bank itself and from rating agencies as well as other sources that are reasonably reliable. Of the sources listed in the answers, the newspaper report is the least reliable.

Which of the following is NOT a requirement of Regulation F? A. Writing and maintaining policies and procedures for managing exposure to correspondent banks B. Monitoring the exposure to correspondent banks on a regular basis C. Establishing internal limits on exposure to correspondents D. Providing quarterly reports to the board of directors of compliance audit results

The correct answer is d. 12 CFR 206.3, 206.4, and 206.5 Outline II A and B Quarterly compliance audit reports to the board are not a requirement of Regulation F.

What obligation does a bank have to disclose a covered CRA agreement 40 months after it terminates? A. It must maintain a copy in its CRA public file. B. It must send a copy to its regulatory agency upon request. C. It must send a copy to a member of the public upon request. D. It has no obligation to disclose these covered CRA agreements.

The correct answer is d. 12 CFR 207.6; 12 CFR 35.6; 12 CFR 346.6; 12 CFR 133.6 Outline II A There is no requirement to disclose the agreement when it has been terminated for such a long time.

When is the purchase of flood insurance required on or before loan closing? A. Construction mortgage loan is to be secured by a single family dwelling in a participating community B. Conventional mortgage loan is to be secured by an attached mobile home in a special flood hazard area of a nonparticipating community C. Conventional mortgage loan is to be secured by a vacant lot located in a special flood hazard area of a participating community D. Business mortgage loan is to be secured by a commercial building located in a special flood hazard area of a participating community

The correct answer is d. 12 CFR 208.25(c), 12 CFR 22.3, 12 CFR 339.3, and 12 CFR 172.3 Outline II A(1) The other alternatives do not require flood insurance. Vacant lots are not covered. Property in nonparticipating communities does not require insurance. Construction loans require flood insurance if the building will be located in a special flood hazard area, but the insurance does not have to be in place on or before loan closing as long as the lender has reasonable controls in place to assure that the insurance will be purchased when walls and a roof are in place.

Martha Whitmire, the BSA Compliance Officer for First National Bank, is responsible for monitoring the bank's daily currency activity and wire transfers, for compliance with information retention and reporting requirements. Ms. Whitmire notices during her review on March 10 that, during the previous two weeks, a transaction occurred on the same account several times during the week. The activity appeared at one branch office as cash deposits in dollar amounts under the reporting thresholds. Ms. Whitmire discusses this activity with the branch manager and determines that this same deposit activity occurred several times during the previous six weeks. She then conducts a more extensive examination of the account's activity for several months and discovers that cash deposits were made at one branch office and purchases of bank cashier's checks were made by withdrawals from the same account at a different branch office. All withdrawals and purchases of cashier's checks were for the identical amount as the cash deposits. Which statement best describes Ms. Whitmire's responsibility? A. Complete a CTR for each of the cash activities at the branch office B. Make no report of the activities because the transactions were not discovered until after the 15-day reporting deadline C. Report the account activity to senior management for further review D. Report the account activity as suspicious account activity and recommend that a SAR be filed

The correct answer is d. 12 CFR 208.62(c)(4) Outline XI A(1) Based on the fact that the customer was structuring deposits and purchasing cashier's checks after making the cash deposits, which is potentially a laundering activity, the bank should file a SAR.

Which of the following is (are) NOT covered by the regulation? A. All banks regardless of insurance sales. B. A lender who indicates to the consumer that he or she is selling insurance on behalf of the bank C. A person to whom the bank refers consumers and who has a contract with the bank to receive commissions on sales of insurance D. A person who sells insurance to nonconsumers for other than personal, family, or household purposes

The correct answer is d. 12 CFR 208.82; 12 CFR 14.20; 12 CFR 343.20; 12 CFR 136.20 Outline I B

ACME Bank would like its tellers to help sell insurance products to new and existing customers. The tellers would refer customers to personal bankers who have insurance licenses from the state. The bank would like to reward tellers by giving them a small percentage of the commission for each policy sold where the sale resulted from a referral. Which of the following statements presents ACME's biggest concern in complying with the Consumer Protection in Sales of Insurance regulation? A. It is difficult for many people to get an insurance license. B. It is hard for tellers to handle so many types of products. C. It is hard to physically separate insured deposit products from insurance products. D. Tellers should not be rewarded only when the referral results in a sale.

The correct answer is d. 12 CFR 208.85, 12 CFR 14.50, and 12 CFR 343.50 and 12 CFR 136.50 Outline V C A person receiving a referral fee should receive no more than a one-time, nominal fee of a fixed dollar amount for each referral. The referral fee cannot depend on whether the referral results in a transaction.

According to federal regulations, what must a security officer do when establishing a bank security program? A. Survey competitors' security procedures B. Hire uniformed armed guards to monitor the bank lobby C. Modify the cash vault to meet minimum wall thickness standards D. Institute procedures for testing security devices periodically

The correct answer is d. 12 CFR 21.3(a)(4); 12 CFR 208.61(c)(1)(iv); 12 CFR 326.3(a)(4); 12 CFR 168.3(a)(3) Outline I C(2)(d)

At which of the following locations may a collecting bank NOT present an item? A. A place requested by the paying bank B. A place requested by the nonbank payor if payable by the nonbank payor C. Through a clearinghouse D. Any bank for which presentment of the item would be convenient

The correct answer is d. 12 CFR 210.7(b) Regulation J Outline II F

A current member of the board of directors at First Savings Association (an institution with $150 million in total assets) was a director at First National Bank (an institution with total assets of $200 million) for many years. The two institutions are located in the same town. Before being elected to the board of First Savings, the director retired from the First National board. To honor his years of service with First National, the bank made him a director emeritus for life. He can attend any board meeting but cannot vote. He may speak to matters before the board and receives a director's fee. In actuality, however, the director never attends board meetings. Does this relationship violate Regulation L? A. No, because he does not attend meetings. B. No, because he cannot vote. C. Yes, because he receives a fee. D. Yes, because he is really an honorary director.

The correct answer is d. 12 CFR 212.2; 12 CFR 26.2, 12 CFR 348.2, 12 CFR 196.2 Outline I A(1) The fact that the director can or cannot vote is not relevant, nor is the fact that he receives a fee a deciding factor. The director can attend the meetings and, according to regulatory interpretations, is an honorary director. Because the institution's assets are $100 million or greater, the director is a ''management official,'' and the interlock is not legal.

Which of the following transactions is subject to the provisions of Regulation O? A. Time deposit account held by a director B. Travel advance to an executive officer outstanding for less than 30 days C. Extension of credit to a director of an unaffiliated, competing, non-correspondent bank D. Extension of credit to a member of the bank's board of directors

The correct answer is d. 12 CFR 215.2(d)(1) and 215.3(b) Outline I H(2) The other alternatives are specifically exempted from the definition of extension of credit in Regulation O.

First National Bank has an employee benefit program whereby all bank employees who meet the bank's credit underwriting standards may obtain consumer loans for major purchases or expenses at a rate that is less than the bank's prime rate. Can the bank allow its executive officers to borrow under this program? A. No. Executive officers may not have preferential interest rates under any circumstances. B. No. However, the related interests of the executive officers may take advantage of it. C. Yes. However, executive officers must secure their loans with collateral valued at 100 percent of the loan balance or more. D. Yes. Provided the program is available to everyone at the bank as an employee benefit, executive officers may also participate

The correct answer is d. 12 CFR 215.4(a)(2) Outline II A(1) Credit may be offered to insiders if it is pursuant to a benefit or compensation program widely available to employees of the bank.

Which of the following is NOT a requirement when a bank pays an employee a fee for referring a high-net-worth or institutional customer to a broker? A. The bank must have a written agreement with the broker B. The bank must give a disclosure to the customer C. The bank must reasonably believe that the customer is a high net worth or institutional customer D. The employee must be registered with the bank's regulatory agency

The correct answer is d. 12 CFR 218.701 Outline Regulation R III B(2), (3) and (6) Bank employees do not have to be registered with any federal government agency, and, in fact, to pay a bank employee a referral fee, the employee cannot be registered, required to be registered or approved by any self-regulatory agency.

First National Bank has received a request from the Securities and Exchange Commission (SEC) for financial records. The customer has given permission to disclose the information. The bank can be reimbursed at the stated rate for all but one of the following costs. Which cost(s) would NOT be reimbursed? A. Actual fee paid to an offsite storage facility for retrieving and copying records B. Employee time spent in retrieving and organizing the records at a rate of $22 per hour C. Actual costs of the CDs the electronic records will be stored on D. $500 paid to the bank's attorney for a review of the SEC request to determine its validity and to advise the bank of its course of action

The correct answer is d. 12 CFR 219.3(b)(1) Outline II D(3) Specific costs for expert and legal advice are not reimbursable.

First National Bank received the following requests for financial information. For which of them would the bank receive reimbursement for its costs under Regulation S? A. A summons from the IRS for information on several customer checking accounts B. A request from the FINRA for records of the bank in connection with an investigation of the bank C. A request from the GAO for information pursuant to an audit of the Government National Mortgage Association D. A request from the VA for a customer's name and address pursuant to an internal VA investigation of the customer's activities

The correct answer is d. 12 CFR 219.4(e), (i), and (l) Outline III D, I J and L This exemption is solely for the VA's benefits program.

If a bank makes a loan that is in compliance with Regulation U, what will be the status of the loan at its consummation? A. The loan will be in compliance until it is renewed, regardless of the reduction of the borrower's equity in the stock. B. The loan will be in compliance only if the value of the stock remains within the margin requirements. C. The loan will be in compliance unless the status of the stock changes (for example, margin or nonmargin) D. The loan will always be in compliance until its maturity, regardless of the reduction of the borrower's equity in the stock, provided there are no substitutions or withdrawals that adversely affect the loan value.

The correct answer is d. 12 CFR 221.3(a)(2) Outline II B(2) A bank may continue to maintain a credit even if the borrower's equity in the stock is reduced or if the status of the stock changes.

In which of the following cases would ABC Bank have to obtain an appraisal performed by a state-certified appraiser? A. On a $200,000 loan made by Mr. and Mrs. Littlefield to purchase their home, which will be secured by their home B. On a $75,000 loan to be secured by a two-story commercial office building C. On a $150,000 working capital loan fully secured by a bank certificate of deposit, on which the loan officer has also taken a lien on a vacant lot owned by the borrower D. On a $300,000 loan to Mr. Burch secured by his life estate in his home. The home was left to Mr. Burch on the death of his father. The father's will states that the home will belong to Mr. Burch during his life but will revert to Mr. Burch's son on his death.

The correct answer is d. 12 CFR 225.63(b), 12 CFR 34.43(b), 12 CFR 323.3(b), and 12 CFR 164.3(b) Outline I A and C An appraisal by a certified appraiser is required on loans over $1 million, on nonresidential loans over $250,000, and on complex residential loans over $250,000. In this case (d) is the correct answer because the title to the home owned by Mr. Burch is a life estate interest, which is atypical; therefore, the transaction is complex. Answers (a) and (b) are not correct because the loan amounts are below the regulatory limits for an appraisal by a certified appraiser. Answer (c) is not correct because if the loan is fully secured by a bank certificate of deposit, the loan officer has taken the real estate simply as an abundance of caution and, therefore, an appraisal is not required.

First National Bank made the following loans to Mr. James Wilson during the previous calendar year: • Loan A, made on February 2, is a loan for purchasing margin stock and is secured by margin stock • Loan B, made on March 15, is also for purchasing margin stock and is secured by margin stock • Loan C, made on June 30, is an unsecured loan for purchasing margin stock • Loan D, made on September 10, is for purchasing a car, secured by the car All the loans are still outstanding at the end of the year. Which of the loans must be combined for purposes of the margin requirements of Regulation U? A. All of the loans must be combined B. Loans A and B C. None of the loans must be combined D. Loans A, B, and C

The correct answer is d. 12 CFR 227.3(d) Outline II F All purpose credit extended to a customer must be treated as a single credit for purposes of Regulation U. Unsecured purpose credit extended after secured purpose credit will be combined for purposes of determining whether the loan complies with the restrictions on the maximum loan value of the collateral.

Which of the following is the best method for a large bank to use in monitoring its CRA performance? A. Review the effectiveness of marketing materials. B. Evaluate approval and denial rates for minority loan applicants. C. Perform a quarterly evaluation of the bank's loans-to-deposits ratio. D. Perform a geographic analysis of lending levels and dispersion of loans.

The correct answer is d. 12 CFR 228.22; 12 CFR 345.22; 12 CFR 25.22; 12 CFR 195.22 Outline III (B) This method results in an objective look at the bank's lending pattern and can give the bank a realistic picture of its CRA efforts

In evaluating a bank's CRA performance, to what do bank examiners give the greatest consideration? A. Efforts to analyze the geographic origins of its deposit base B. Efforts to establish communication with members of the community regarding credit needs C. Participation of the bank's board of directors in formulating CRA policy D. Extensions of credit the bank has made where the financing benefits low- and moderate-income borrowers or neighborhoods

The correct answer is d. 12 CFR 228.22; 12 CFR 345.22; 12 CFR 25.22; 12 CFR 195.22 Outline III (B)(1)(b) The purpose of CRA is to encourage lending in low- and moderate- income level neighborhoods.

For which of the following deposits is a bank NOT required to give next day availability? A. A deposit of seven $100 bills B. A deposit of a Social Security check by mail C. A deposit of a Social Security payment D. The deposit of a cashier's check at an ATM

The correct answer is d. 12 CFR 229.10(c)(1)(v) Regulation CC Outline II A(3) This type of deposit must be made in person to a bank employee to be eligible for next-day availability.

What is the required timing for giving notice to customers regarding a change to a bank's Regulation CC funds availability policy that improves or expedites availability? A. At least 15 days prior to implementation B. At least 30 days prior to implementation C. No later than 15 days after implementation D. No later than 30 days after implementation

The correct answer is d. 12 CFR 229.18(e) Outline V D(6)

A $7,000 check is presented to First National Bank, as the paying bank on Monday. First National is going to return the check to the depositary bank. Generally, First National mails return checks to the Federal Reserve Bank and mails its forward collection checks as well to avoid the costs of a courier. Other banks in the community send both return and forward collection checks to the Federal Reserve Bank by courier if the checks are over $5,000. Can First National follow its usual procedure in this case? A. Yes. Provided the bank is consistent in its method of return, it does not have to use the most expeditious method. B. Yes. Provided the bank uses the mail for forward collection, it can use the mail for returns. C. No. The bank must use the method used by banks in similar circumstances. D. No. The bank is required to use an expeditious method of return such that the depositary bank normally would receive the returned check by 2 p.m. (local time of the depositary bank)

The correct answer is d. 12 CFR 229.31(b)(1) Regulation CC Outline X A(2) The bank is required to use an expeditious method of return in order to ensure that the depositary bank would normally receive the returned check by 2 p.m. (local time of the depositary bank). Using the method used by a similarly situated bank is no longer considered an expeditious method as of 7/1/18.

Which of the following statements is true? A. A payment card network may require an issuer to agree that the issuer will only issue cards that are paid through the payment card network or one of its affiliates. B. Payment card networks can restrict a merchant's ability to route electronic debit card transactions as long as they don't restrict it to less than two unaffiliated networks C. If unaffiliated payment card networks merge, issuers have one year from the effective date of the merger to add an unaffiliated payment card network D. An issuer can meet the requirements of the network exclusivity rule by allowing transactions to be processed on two unaffiliated payment card networks that don't restrict transactions based on geography, merchant or transaction type.

The correct answer is d. 12 CFR 235.7(a)(2) Outline III A

Which of the following is NOT a reason that the FRB will use to disapprove a reorganization plan? A. To prevent unsafe or unsound practices B. The lack of financial resources of the organization C. Management's failure to submit a business plan D. Management previous submission of an application for a mutual charter

The correct answer is d. 12 CFR 239.4 Outline II (A)(2)

First National Bank, with assets of $60 million, is located in a large urban area (which has been designated as an MSA). Which of the following is true of the bank's fair housing recordkeeping requirements? A. It must keep an Inquiry/Application Log of all home loans and home improvement loans. B. It does not have to keep any records unless it had at least 50 applications for home purchase loans during the previous calendar year. C. It must keep monthly information on all home loan applications (including purchase, permanent financing, and refinancing) regarding the number of applications received, the number denied, the number withdrawn, and the number of loans closed. D. It must keep its HMDA LAR updated quarterly.

The correct answer is d. 12 CFR 27.3(a) Outline II D National banks that are subject to HMDA fulfill fair housing recordkeeping requirements by completing their HMDA LAR and updating it within 30 days of the end of the calendar quarter.

Which of the following national banks must keep an Inquiry/Application Log? A. A bank that had 50 or more home loan applications in the previous year B. A bank that has $50 million or more in assets C. A bank that is located in an MSA D. A bank that has been requested by the OCC to keep such a log because of complaints that its lending practices may be discriminatory

The correct answer is d. 12 CFR 27.4(a) Outline II G(1)

State National Bank's security officer is preparing for the bank's annual information security review. Which of the following steps is NOT required for this review? A. An intrusion test of the bank's online banking system B. An audit of the bank lobby during business hours to determine whether customer information is kept private C. A review of all contracts from service providers with access to bank customer information D. A review of all outside windows to check for physical security

The correct answer is d. 12 CFR 30 Appendix B Section III; 12 CFR 208 Appendix D-2 Section III; 12 CFR 364 Appendix B Section III; 12 CFR 570 Appendix B Section III Outline II B Item (d) is not a requirement of safeguarding customer information. It is, however, a security procedure related to the Bank Protection Act.

Which of the following is exempt from the lending limit rules? A. Residential housing loans B. Derivative transactions C. Securities borrowing D. An eligible bankers acceptance

The correct answer is d. 12 CFR 32.3(c) Outline I D(2)

Friendly Savings Association has made loans to ABC Co., Inc., and several of its subsidiaries. The association does not believe that the loans have to be combined under the common enterprise test. To what lending limit, if any, does the association have to adhere in its lending to ABC Co., Inc., and its subsidiaries? A. None. If the loans can be combined, there is no limit on the group as a whole, only separately B. 15 percent of the association's capital and unimpaired surplus C. 10 percent of the association's capital and unimpaired surplus D. 50 percent of the association's unimpaired capital and unimpaired surplus

The correct answer is d. 12 CFR 32.5(c)(3) Outline IV B(2)

Assuming that the following are interest-bearing accounts at First National Bank and the SMDIA is $250,000: Single Accounts Balances Joint Accounts Balances Jim $250,000 Jim and Fred $180,000 Fred $350,000 Fred and Jim $160,000 Susan and Jim $300,000 How much of Jim's money is covered by deposit insurance? A. $890,000 B. $640,000 C. $570,000 D. $500,000

The correct answer is d. 12 CFR 330.6 and 330.9(b) Outline III A and B Under the SMDIA $250,000 limit, Jim's single ownership account is insured separately for the $250,000. His one-half interest in each of the three joint accounts is aggregated and limited to $250,000. Therefore, his joint account balance of $320,000 is insured for $250,000 and $70,000 is uninsured.

Consider the following deposit balance information: Account Name Deposit Balance Ann Jones $50,000 Ann Jones $50,000 Jim Smith and Ann Jones $50,000 Jim Smith $75,000 Ann Jones: Agent for Jim Smith $75,000 Ann Jones and Jim Smith $100,000 TOTAL $400,000 How much of the $400,000 is FDIC insured if the SMDIA is $250,000? A. $275,000 B. $325,000 C. $350,000 D. $400,000

The correct answer is d. 12 CFR 330.6, 12 CFR 330.9 Outline III A and B SMDIA is $100,000 Accounts Ann Jones $50,000 Ann Jones $50,000 Jim Smith and Ann Jones $50,000 Jim Smith $75,000 Ann Jones: Agent for Jim Smith $75,000 Ann Jones and Jim Smith $100,000 TOTAL $400,000 Total of balances in Ann Jones individual accounts—$100,000 Total insured—$100,000 Total of balances in Ann Jones and Jim Smith joint accounts—$150,000; assume that each has a one-half interest ($75,000 each)—total of $150,000 insured. Total of balances in individual accounts for Jim Smith—$75,000 in account styled ''Jim Smith,'' and $75,000 in account styled ''Ann Jones, Agent for Jim Smith,'' all are counted as individual accounts—total balances are $150,000; total insured: $150,000 Total insured balances: $400,000

First State Bank, a state nonmember bank, is auditing its recordkeeping procedures for compliance with the FDIC Fair Housing regulations. Which loan should be reviewed? A. A loan to purchase a mobile home to be used as a vacation home B. A home equity line of credit C. A loan to purchase vacant land for the construction of a residence D. A home purchase loan

The correct answer is d. 12 CFR 338.7(a) Outline III The FDIC Fair Housing regulation covers only the home purchase loan. Refinancings of purchase loans are also covered.

Safe National Bank has a variety of consumer lending products. Among them are debt cancellation contracts that allow for the cancellation of a consumer's debt if certain events happen. The bank solicits sales for these contracts when the consumer makes an in-person loan application. What does Safe National have to do at the time of the application and solicitation? A. Nothing. Disclosures are required only when the contract is made. B. Give the customer the short-form disclosures orally. C. Give the customer the short-form disclosures in writing. D. Give the customer the short form disclosures orally and the long-form disclosures in writing.

The correct answer is d. 12 CFR 37.6(c) Outline II D(1)(a)and (b)

First National Bank received a credit application from Lewis Nelson for a home equity loan. Bank policy prohibits originating loans to applicants that are 60 days or more past due on other obligations. Mr. Nelson indicated that he has a $75,000 loan from the Overton Cancer Center. The bank called the cancer center to check the credit history and balance on the loan. The bank discovered that Mr. Nelson is four months past due on the loan. Based on this information, the bank denied the home equity credit application to Mr. Nelson. Which statement is correct? A. The bank's denial, based on the information, was wrong because the fact that he had a loan from the cancer center involves medical information about the consumer. B. The bank should not have contacted the cancer center at all because doing so involves medical information about the consumer. C. The bank should have had disclosed on its consumer application that medically related debts do not have to be listed. D. The bank acted correctly because it treated the applicant's medical debt just as it would any other debt.

The correct answer is d. 12 CFR 41.30(d)(1); 12 CFR 1022.30(d)(1) Outline VI E(2)(b) Using medical information in a manner that is no less favorable than it uses other forms of credit information is an exception to the general rule.

Friendly Service Bank is a new bank that will focus on offering financial services to consumers. The compliance officer needs to comply with the identity theft prevention requirements of the FACT Act. What should she do first? A. Write a compliant policy that the board can approve B. Establish procedures for handling address changes C. Appoint a task force to establish compliance priorities D. Perform a risk assessment of the bank's risk factors for identity theft

The correct answer is d. 12 CFR 41.90(c),12 CFR 222.90(c), 12 CFR 334.90(c), 12 CFR 571.90(c) Outline III F(2)(a)(ii) The first step in developing an identity theft prevention program is to perform a risk assessment to determine whether the bank offers or maintains covered accounts, consider the methods used to open and provide access to accounts in order to assess the bank's exposure to identity theft threats.

ACME national bank plans to acquire Smith Brothers insurance agency and make it an operating subsidiary of the bank. ACME is considered a well-managed and adequately capitalized bank. What regulatory-related action must ACME take to obtain the agency? A. Complete the sale of the agency and notify the OCC within 10 days B. Complete the sale of the agency and notify the OCC within 30 days C. No regulatory notice is required D. Notify the OCC before completing the sale

The correct answer is d. 12 CFR 5.34(e) Outline II B and C The bank is not well capitalized; therefore, it must give prior notice to the OCC before purchasing the agency

Which of the following transactions requires completion of FinCEN Form 104, a CTR? A. Deposit of checks totaling $12,000 to a checking account B. Cash purchase of a cashier's check for $7,800 C. Cash withdrawal of $3,000 from a checking account D. Cashing of a $14,000 check for a customer

The correct answer is d. 12 CFR Chapter X 1010.310 Outline III A This is the only one of the choices that involved currency in excess of $10,000

In which of the following cases would First National Bank be required to give a branch closing notice? A. Removing its ATM from the local grocery store B. Opening a deposit-taking facility in a kiosk during a college fair for one weekend C. Moving its central branch across the street D. Closing its near-town neighborhood branch

The correct answer is d. 12 USC 1831(r-1) Outline I A and B ATMs are not considered branches under the law. Temporary branch facilities are also not covered. The relocation of a branch is not considered to be a branch closing.

Big Nationwide Bank has decided to close one of its smaller branches in Texas. A community association from the small town where the branch is located is not pleased with the decision because Big Nationwide's branch is the only financial institution in the small town. The community group complains to the federal agency that regulates Big Nationwide. What must Big Nationwide do in light of this protest against its decision to close the branch? A. Re-post the notice and wait an additional 90 days B. Send the federal agency a detailed statistical analysis that is consistent with its branch closing policy and that proves why closing the branch is economically necessary12 USC 1831(r-1)(d)(3) Outline III As long as the bank complies with the notice requirements, nothing else is required of it to close the branch. However, the regulatory agency may convene a public meeting to hear from interested parties about alternatives to closing the branch. C. Meet with the community group, explain their reasoning, and help the group find some alternative financial services D. Nothing is required

The correct answer is d. 12 USC 1831(r-1)(d)(3) Outline III As long as the bank complies with the notice requirements, nothing else is required of it to close the branch. However, the regulatory agency may convene a public meeting to hear from interested parties about alternatives to closing the branch.

In which of the following cases is a branch closing notice required? A. Bank A decides to stop cashing checks for noncustomers at its neighborhood branch. B. Bank B and Bank C merge. Each has a branch in the near-town neighborhood. The merged organization is closing the branch that was formerly Bank B and merging it into the branch that was formerly Bank C. C. Bank D is closing its drive-through facilities in its near-town neighborhood branch, although its regular facility is remaining. D. Bank E is closing its near-town facility because of its outmoded building and equipment. Bank E has commissioned a study from a local development center to determine if it is feasible to re-open its branch in the future.

The correct answer is d. 12 USC 1831(r-1)(e) Outline I A, B, and D In this case the only instance where the branch will be closed without leaving a fully functioning branch in its place is (d).

If records are obtained pursuant to a search warrant, when must the government agency notify the customer of its receipt of the customer's financial records? A. Within 10 days after serving the search warrant B. Within 30 days after serving the search warrant C. Within 60 days after serving the search warrant D. Within 90 days after serving the search warrant

The correct answer is d. 12 USC 3406(b) Outline II A(3)

Of the following situations, which situation does NOT qualify as an exception to the Right to Financial Privacy requirements? A. When the U.S. attorney is seeking customer records pursuant to the Federal Code of Civil Procedure in a case where the customer and the government are parties B. When the bank believes that an officer has committed a crime against the bank and supplies information to the FDIC C. When the OCC is conducting an examination of the financial institution D. When the Federal Trade Commission (FTC) is seeking financial information on a customer as part of a large investigation for which no charges have yet been issued

The correct answer is d. 12 USC 3413(b), (e), and (l) Outline II C Certain exceptions apply to the Right to Financial Privacy Act. The agencies that regulate a financial institution may obtain records in the course of an examination. Anytime a bank insider is suspected of committing a crime against the bank, the provisions of the Right to Financial Privacy Act do not apply. The act also does not apply to requests for information pursuant to the Federal Code of Criminal or Civil Procedure if both the government and the customer are parties to the action.

Roger Jameson is the head of the consumer loan department at First National Bank. He is a regular participant in a lending committee of a local finance trade association. The committee meets once a month at a local hotel. After the committee meetings, Roger and several other committee members who are officers at other banks in town go to a hotel restaurant and talk for a couple of hours before leaving. During these informal conversations Roger learned that the other members require the car dealerships in town that sell consumer installment contracts to the banks to refrain from selling them to local savings and loan associations. Roger believes that this is a good idea and would like to implement it at First National. Is there a problem with doing so? A. No, because interest rates are not involved. B. No, because this decision would have no effect on the cost to the consumer. C. Yes, unless there are enough dealerships in town to provide contracts to all of the institutions. D. Yes. Restricting the dealerships is a restraint of trade.

The correct answer is d. 15 USC 1 Outline I A This action could be considered both a restraint of trade and a conspiracy to restrain trade.

ABC Bank regularly sends email messages to its customers. Some of the emails are promotions for various bank products. Others are notifications of account balances, requested by the customer. John Smith, a customer of the bank, asks not to receive commercial email messages from the bank. What must the bank do? A. Stop sending any emails to Mr. Smith within 30 days of the request B. Stop only the advertising emails to Mr. Smith within 30 days of the request C. Stop sending any emails to Mr. Smith within 10 days of the request D. Stop sending only the advertising emails to Mr. Smith within 10 days of the request

The correct answer is d. 15 USC 103 §7704(a)(4)(A)(i) Outline IV B(3) The bank is required to offer an opt-out for commercial email messages. The email containing the customer's account information is not a commercial message. The requirement is that the bank stop sending the commercial messages within 10 days of the exercise of the opt-out.

When may a debt collector communicate with third parties about the consumer? A. If the consumer has defaulted on the credit obligation B. To determine the consumer's employment C. If the collector identifies himself or herself as a debt collector D. To determine the consumer's location

The correct answer is d. 15 USC 1692b Outline II A(2)(g) A debt collector may communicate with third parties about a consumer only to determine the location of the consumer. The debt collector may only identify himself or herself and should not identify his or her employer unless expressly requested to do so.

National Bank generally discloses information only to affiliated parties. However, in the following circumstances, it will disclose information to nonaffiliated parties. •It shares information with its service processor for the purpose of completing transactions. •It sends details of loan transactions to its lawyers so that documentation can be drawn. •It allows its external auditors to see transactions. •From time to time for business development purposes, it shares full loan files with an affiliated finance company that is owned by its holding company. Does National have any responsibility to provide customers an opt-out option? A. No. The bank shares only with affiliated parties except for the exemptions allowed by the privacy regulation. B. Yes. Any information sharing requires an opt-out notice. C. Yes. The loan transaction information given to the lawyers triggers the opt-out notice requirement. D. Yes. The bank must give a Fair Credit Reporting Act opt-out for the information, even for sharing with an affiliate.

The correct answer is d. 15 USC CH 31 1681(a) and (c) Outline II C(7) All of the information sharing listed falls within the exceptions of the privacy regulation. However, even sharing credit information with an affiliate triggers a Fair Credit Reporting Act opt-out requirement. If the bank was sharing only its own experience, it would not need to give the notice.

A compliance officer receives a call from a loan officer who asks for advice on what she should do with a stock certificate (1,437 shares of IBM) from a new loan customer who wants to pledge it in support of a loan that has been approved at your bank. What should the compliance officer tell her FIRST? A. Retain a copy of the certificate in the loan file B. Retain the original certificate in the branch vault for the term of the loan C. Record the certificate information and give the original back to the customer D. Contact the SIC to determine if the certificate was reported as lost, counterfeit, or stolen

The correct answer is d. 17 CFR 240 17f-1(d) Outline III Unless the certificate is received in connection with one of the types of transactions that do not require that an inquiry be made, banks must inquire about all certificates that come into their possession to ascertain whether they have been reported as lost, counterfeit, or stolen.

When is it permissible for a bank that is a government securities broker or dealer to refrain from filing a Form G-FIN-5 or a Form MSD-5 when an employee terminates the associated person status? A. When the employee files the form B. When the bank does not have all the necessary information and notifies its regulatory agency C. When the employee's status is reinstated within six months D. When the employee remains employed by the bank and the bank notifies its regulatory agency

The correct answer is d. 17 CFR 400.4(d)(2) Outline II B(2)

What is the maximum number of government securities transactions a bank may have and still remain exempt from the Government Securities Act? A. 100 per year B. 250 per year C. 400 per year D. 499 per year

The correct answer is d. 17 CFR 401.3(a)(2)(i) Outline VIII D

Bank A offers safe deposit services in a vault area that contains a door too narrow for wheelchair passage. The bank cannot widen the door because of the vault construction. Therefore, when a customer in a wheelchair needs access to a safe deposit box the customer cannot enter the vault. The bank provides viewing rooms for all safe deposit customers, and one of these rooms has a door wide enough for a disabled customer to enter. Which of the following must the bank do to provide safe deposit box service to wheelchair customers? A. Remove the old vault and install a new vault to allow wheelchair access B. Construct an alternative facility in which to store the safe deposit boxes of wheelchair customers C. Require wheelchair customers to be accompanied by a walking individual to retrieve the safe deposit box for the customer D. Bring the safe deposit box to the customer and provide an accessible area where the customer may privately have access to the contents

The correct answer is d. 28 CFR 36 Outline III B(2), (10), and (11) The bank must make this service available in a manner that provides equal benefits. Because a nondisabled person would not have to be accompanied by another individual, the bank cannot require this of a disabled person. Also, the construction of a new vault is a significantly expensive undertaking, one that would probably impose an undue burden on the bank. The best alternative is to provide the disabled person with access to a private location and have bank personnel retrieve and deliver the box.

ABC Bank has several customers with hearing disabilities. Of the following, which statement is true? A. The bank can require its customers to bring hearing companions to interpret for them B. The bank must hire an interpreter to assist with communications with disabled customers C. The bank is not required to make any accommodations to disabled customers D. The bank must reasonably provide auxiliary aids and services to assist in communications with its disabled customers

The correct answer is d. 28 CFR 36.303 Outline III B(10)(a)

The Bank received a notice of garnishment on one of their consumer deposit accounts. What is the first thing the bank should do? A. Conduct an account review to determine if there have been any Federal benefit payments B. Follow their usual garnishment procedures C. Notify the account holder D. Examine the order for a Notice of Right to Garnish Federal Benefits

The correct answer is d. 31 CFR 212.4 Outline II A This action must be taken first. If there is such a notice, then the normal garnishment procedures may be followed. If not, the account review must be conducted.

Your institution has identified a deposit made by an existing depositor to an entity on the OFAC SDN list that should be blocked under OFAC requirements. The branch manager contacts you for specific instructions. Before reporting the transaction to OFAC, what should the bank do? A. Reject the transaction B. Process the transaction C. Close the customer's account D. Place the funds in an interest-bearing account

The correct answer is d. 31 CFR 515 Outline III F

Mrs. Evans, a customer of First National Bank, deposits $15,000 in cash to her account. During the transaction, Mrs. Evans explains that she received the money in the mail from her sister in Europe. What responsibility does the bank have? A. Complete a Currency Transaction Report (CTR) B. Complete a United States Customs form 4790 (CMIR) C. Complete both a currency transaction report and a CMIR D. Complete a CTR and encourage Mrs. Evans to file a CMIR

The correct answer is d. 31 CFR Chapter X 1010.311 , and FIN-1988-R002, formerly known as Administrative Ruling 88-2 Outline IV A and C The bank is not responsible for filing a CMIR because it was neither the sender nor the receiver of the cash.

An individual comes into the bank and makes a $6,000 cash deposit into a checking account. At the same time, the individual buys a $7,000 cashier's check with cash. According to the Bank Secrecy Act, what is the bank is required to do? A. File a SAR for $13,000 B. File a CTR for the $6,000 cash deposit C. Aggregate the transactions and retain information about the purchase of the cashier's check D. Obtain the recordkeeping information for the purchase of the cashier's check and complete a CTR for the total cash-in transaction of $13,000

The correct answer is d. 31 CFR Chapter X 1010.313(b) Outline III A(3) Multiple cash transactions must be aggregated.

On which of the following loans must a bank maintain records under the Bank Secrecy Act? A. All loans exceeding $5,000 and secured by real property B. All loans exceeding $5,000, but not secured by real property C. All loans exceeding $10,000 and secured by real property D. All loans exceeding $10,000, but not secured by real property

The correct answer is d. 31 CFR Chapter X 1010.410(a) Outline XIII J The record retention requirement applies to loans over $10,000, not secured by real property.

The manager of Main Street branch calls and relates the following information: John Smith purchased a cashier's check for $1,000 cash at 10:00 a.m. on Tuesday. At 11:30 a.m. Mr. Smith returned and purchased a cashier's check for $2,500 cash and deposited traveler's checks totaling $9,000 into his checking account. At 4:00 p.m. Mr. Smith returned and deposited $8,000 cash into his checking account. This deposit was after normal banking hours, so it was recorded as of Wednesday's business date. What action should the bank take? A. None, because no single cash transaction exceeded $10,000 B. File a Currency Transaction Report (CTR) for $11,500 C. Record the $1,000, $2,500, and $9,000 transactions on the bank's monetary instrument sales log because the total exceeds the $3,000 threshold D. Record the $1,000 and $2,500 transactions on the bank's monetary instrument sales log because the total exceeds the $3,000 threshold

The correct answer is d. 31 CFR Chapter X 1010.415(a) Outline VI B If a bank employee knows multiple currency transactions or multiple cash purchases of monetary instruments have occurred during a single business day, aggregation is necessary. During the business day of Tuesday, aggregate cash purchases of cashier's checks totaling $3,500 would be sufficient to trigger log entries, but not a CTR.

Which of the following is an accurate statement according to the requirements of the customer identification program regulations? A. A bank must always require documentary verification of a customer's identification B. A bank may waive any part of the CIP requirements if senior management approves the waiver and there is a good cause C. A physical address or a post office box is acceptable for any new customer D. The bank's CIP program must enable it to form a reasonable belief about the identity of the person

The correct answer is d. 31 CFR Chapter X 1020.220(a)(2) Outline X B(3)(a)(i) CIP regulatory requirements cannot be waived. A bank may use non-documentary methods to verify identification if it is reasonable to do so. A physical address is required for all customers except for a few exceptions, such as a person on active duty with an army post office box.

James Walker DBA Walker Enterprises has been a customer of the bank for one month. The company told the bank that it would regularly make deposits in excess of $10,000 because it operates several laundromats in the city. The bank performed a background check on the company before opening the account. For its first 30 days, the company made 12 large cash deposits. Can the bank exempt this company now? Why or why not? A. No. It is a not a corporation, but a sole proprietorship. B. No. It has not maintained an account at the bank for 12 months. C. No. It operates an ineligible business. D. Yes. The bank conducted due diligence on the customer to determine that it had legitimate large cash transactions.

The correct answer is d. 31 CFR Chapter X 1020.315(b) and (d) Outline III B(2)(e) The company has been verified to have legitimate needs for cash transactions so the bank can exempt it once its due diligence is complete.

First National Bank is attempting to determine which of the following customers would qualify as exempt persons: • Nationwide Foods, Inc., is a national company with stock listed on the New York Stock Exchange • National Paper Products, is a wholly owned subsidiary of Nationwide Foods, Inc. • Products Incorporated, a depositor for three months, is a regional company whose stock is designated a NASDAQ Capital Markets Company and that sells and leases large boats • Century Enterprises, a local company owning several local restaurants, is a long-time bank customer and frequently makes cash deposits in excess of $10,000. All of Century's stock is owned by a local family. Which of these customers would qualify as an exempt person? A. All except for Nationwide Foods, Inc. B. All except for National Paper Products C. All except for Century Enterprises D. All except for Products Incorporated

The correct answer is d. 31 CFR Chapter X 1020.315(b), (c) and (e) Outline III B(2)(d) and (4) The NYSE company and its wholly owned subsidiary are exempt. The local company can be exempt because it has maintained an account for at least two months and frequently makes large cash deposits. Products Incorporated is not eligible because its stock is not listed on a major exchange and does not qualify as a non-listed business.

First National Bank has several exempt customers. • Alpha is an exempt person because its stock is listed on a major stock exchange. • Beta is an exempt person because it meets the non-listed customer requirements. • Zeta is exempt because it is a payroll customer. For which customer(s) must the bank conduct an annual review to determine its continuing eligibility to be exempt from CTR filings? A. Alpha B. Beta C. Zeta D. Alpha, Beta, and Zeta

The correct answer is d. 31 CFR Chapter X 1020.315(d); 103.22(5) Outline III B(3) Alpha should be reviewed annually to ensure its stock continues to be listed on a major exchange, and Beta and Zeta are not listed businesses, so the bank must conduct a review annually.

Records that must be retained for deposit accounts include which of the following? A. Average daily balance B. Overdraft history C. All amounts of currency deposited or withdrawn D. Customer's identity

The correct answer is d. 31 CFR Chapter X 1020.410(c)(1) Outline X B

First National Bank owns several pieces of real estate obtained through foreclosures. Two of these are homes that the bank would like to market and sell within the community. The bank will also provide financing for these homes. In addition, the bank owns an apartment complex that it is managing until it is sold. In relation to these properties, which of the following issues is NOT a Fair Housing Act issue? A. Discrimination based on familial status in renting apartments B. Accessibility of the apartment complex to handicapped persons C. Whether potential buyers of the houses are being discouraged from looking at the houses because of race or ethnic background D. Affordability of the apartments relative to the community immediately around the complex

The correct answer is d. 42 USC 3601 Outline II A and C The Fair Housing Act covers all phases of real estate transactions. The bank is subject to the act as an owner and as a creditor in this example. The bank must be careful to ensure that potential apartment tenants are not discriminated against on the basis that they have or are anticipated to have children under the age of 18. The bank must be careful to include the needs of handicapped persons in modifying or designing physical structures in the apartment complex. When marketing the houses the bank should make sure that it or its real estate agents do not engage in illegal practices such as steering (that is, directing persons to or from a neighborhood based on race, ethnic group, or religion). The monthly rent on the apartments themselves is not a Fair Housing issue provided the rent on any one type of unit is charged equally to all persons regardless of race, color, national origin, sex, religion, familial status, or handicap of the person

Which of the following is NOT a prohibited basis of discrimination under the federal Fair Housing Act? A. Race B. Disability C. Religion D. Sexual orientation

The correct answer is d. 42 USC Chapter 3605 Outline II A Sexual orientation is not included in the list of prohibited bases.

ABC Bank would like to send faxes to as many people as possible within its community to introduce some new product offerings. To which group may ABC legally send a fax? A. Anyone within its local community B. Its existing customers only C. Its existing customers and former customers only D. Its existing customers, former customers, and anyone who has made an inquiry or application in the past about the bank's services

The correct answer is d. 47 CFR 64.1200(a)(3) and (f)(5) Outline V B(1)(a) The definition of an established business relationship is much broader for the purposes of the Junk Fax rule.

Arthur Hadley has been a sergeant in the U.S. Army for five years. He has been stationed at an army base in the United States for the last three years. He has a banking relationship with a bank in the town where his base is located. Currently he has a car loan with two years remaining on its term and a credit card with a $1,200 balance at the bank. Both obligations were incurred after he entered into active military duty. Arthur received word that his unit is being sent overseas on a peacekeeping mission. He informs the bank officer that he would like to have his car loan stayed until he returns from his mission. He would also like to have his credit card balance stayed with no payments due until he returns. What is the bank required to do? A. The bank must stay the installment loan payment obligation. B. The bank must stay the credit card payment obligation. C. The bank must stay both the installment loan and credit card obligations. D. The bank is not required to stay either obligation.

The correct answer is d. 50 USC Appendix Sections 518-538 Outline I A(2-3) The law does not require a bank to stay any obligations. The bank cannot foreclose or obtain a default judgment without a court's approval when the borrower is in the military, but there is no requirement to stay an obligation.

A recent audit revealed that the bank's personal trust division was failing to determine whether securities being accepted from new trust customers have been reported as lost or stolen. To address the root cause of this problem, what should the compliance officer do FIRST? A. Inquire with the SIC about all securities noted in the audit B. Contact the bank's primary regulator to determine the best course of action C. Retrain all personal trust administrators on the lost and stolen securities requirements D. Review the policies and procedures for accepting securities in new personal trust relationships to ensure securities verification

The correct answer is d. Addressing the policies deficiencies should be the first course of action. Training personnel and inquiring about securities are a part of the corrective action, but the policy must be developed first.

Mr. Smith receives a notice from First National Bank, his mortgage loan servicer, that his mortgage loan payment for March 1 is past-due. However, Mr. Smith made an on-line payment to First National Bank on March 1 which is reflected on his bank statement for his deposit account. Mr. Smith notifies First National Bank of this fact via written notice. A correct response for First National Bank would be to: A. Notify Mr. Smith in writing within five business days that his notice has been received and that this issue will be investigated; then respond by notifying Mr. Smith that the error has been resolved within 30 days of receipt of the notification. B. Correct the error within 5 business days of receipt of Mr. Smith's notice and notify Mr. Smith that the error has been corrected. Incorrect C. Notify Mr. Smith within five business days that his notice has been received. After First National Bank begins investigating the error, it is realized that additional time is going to be needed for research, so First National Bank notifies Mr. Smith that it has extended the response time by 15 days (so a resolution will occur within 45 days from receipt of Mr. Smith's notification. D. All of the above would be correct.

The correct answer is d. All of the responses follow the requirements for error resolution. 12 CFR 1024.35 Outline II E(5)(g)

A recent compliance review revealed that several branch officers are using obsolete loan application forms, which do not include disclosures related to credit insurance sales. Which of the following steps should be taken FIRST? A. Determine which customers were affected and take corrective action. B. Contact the bank's primary regulator to determine the best course of action. C. Instruct the branch to destroy all obsolete forms and immediately begin using the current versions. D. Determine whether the branches use a separate document for required credit insurance sales disclosure.

The correct answer is d. Determine whether the branches use a separate document for required credit insurance sales disclosure.

Bob Jones, president of First National Bank, does not believe the bank has to do anything to comply with the FFIEC Interagency Guidance. The bank has an information-only Web site, does not offer any online Internet banking services, and only offers telephone banking at this time. Which of the following statements best describes the bank's responsibility? Statement 1: The bank does not offer any Internet banking services, so it does not need to worry about the Interagency Guidance at this time. Statement 2: First National Bank should conduct a risk assessment on their telephone banking services. They should provide written support for the low risk and adequacy of single-factor authentication. Statement 3: Telephone banking service offers only standard balance and transfer between accounts. No risk assessment is required. Statement 4: The bank should have information on fraud and identity theft inserted on its Web site for customer awareness. Information should also be available in the bank lobby and should be evaluated periodically. A. Statement 1 only B. Statement 2 only C. Statements 1 and 2 D. Statements 2 and 4

The correct answer is d. FFIEC Guidance Outline I A and III A (2)-(4) and H(1) and (3) The bank needs to conduct a risk assessment for its telephone banking services and provide support for maintaining single-factor authentication assessment and low risk. The bank is also required to provide customer awareness information to their customers.

To which of the following activities does the FFIEC Guidance on Authentication apply? A. Internet banking only B. Telephone and Internet banking C. Call center banking only D. Internet, telephone, and call center banking

The correct answer is d. FFIEC Guidance Outline I E The guidance covers all types of electronic banking including voice response units, telephone banking, and call center banking where high-risk transactions can be conducted

Which of the following factors would NOT be considered when evaluating whether specific behavior by a banker violates the statute? A. The social and family ties of the banker B. The standard for business amenities and entertaining in that particular part of the country C. Whether there was a demonstrable business purpose D. Whether a business transaction was consummated as a result

The correct answer is d. Federal agency guidelines,br> Outline II A(4) A banker's family and social relationships are important when evaluating whether the banker has been involved in behavior that violates the statute. If the motivation for accepting a gift is personal relationships, the statute is not violated. Also, activity that would be reasonable in one part of the country might be considered lavish in another. Therefore, the standard of the region must be taken into account. Finally, another factor is whether there was a demonstrable business purpose. A dinner for bank employees might violate the statute if there is no business purpose; whereas, if the dinner is for the purpose of conducting business discussions there would be no violation.

A bank has given a customer a merchandise gift with a fair market value of $25.00 for opening a deposit account. Which of the following statements describes the proper reporting status of this gift? A. If the cost of the gift is under $20.00, it is not reportable to the IRS. B. The cost of the gift is credited to the customer's account as a bonus, increasing the account balance. C. The fair market value of the gift is reported to the customer on the periodic statement. D. The fair market value of the gift is added to the interest paid and reported on Form 1099-INT.

The correct answer is d. IRC Section 3406 Outline III B(3)(b) Payments of more than $10 must be reported.

A banking agency is conducting a credit needs determination. Which of the following is NOT a criterion used in such a determination? A. The bank's CRA rating B. Economic conditions, including loan demand in the bank's communities C. Whether the bank was once part of a failed institution D. The bank's profitability ratios

The correct answer is d. Outline II B (2) 12 CFR 208.7(d)(2) The regulatory agencies will consider several things when making a credit needs determination, including the first three factors listed in the alternatives. The agencies will also consider the bank's line of business concentrations. However, the bank's profitability will not play a role in the determination.

On which of the following loans does First Savings Bank NOT have to provide a 1098-E (Student Loan Interest) report? A. A $10,000 tuition loan made to Bobby Wilcox, a student at the state university, guaranteed by the Department of Education B. A $35,000 line of credit made to Don and Barbara Cocelli, secured by their home, for the payment of certified school expenses for their twin daughters at an accredited private school C. A $15,000 loan to Linda Chu to be used for the purpose of paying tuition and fees and purchasing college books, lab equipment, and a computer for use in her education at the local community college D. A $12,000 loan to Paul and Rhonda Pena and their daughter Jennifer, used to pay her college tuition as well as the tuition at the private high school her sister, Jeanne, attends

The correct answer is d. IRC Section 6050S; Treas. Reg. Section 1.221-1(e) Outline VI B(2)(e) This loan is not solely for educational expenses at a postsecondary school because part of it went to pay Jeanne's highschool tuition. Because the purpose of the loan is not solely for a qualified education loan, it is not covered.

ACME Bank is reviewing its security program for safeguarding customer information. All but one of the following functions should be included in its review. Which one need NOT be included? A. The bank's Internet Web site B. The bank's loan operations back office where loan files are kept C. The bank's system of disposing of its trash D. The bank's printed marketing and promotional materials

The correct answer is d. Interagency Guidelines Section II A Outline II A(2)

A bank municipal securities dealer has 30 employees in its municipal securities operation. How many municipal securities principals must it have? A. At least one B. At least three C. No more than five D. At least two

The correct answer is d. MSRB Rule G-3 Outline II A(4)

First National Bank (FNB) purchased a table for $500 at the Governor's reelection fundraising dinner last fall. FNB President Sally Holmes tells Mary Watkins, the municipal securities principal, that the bank is planning to participate in the upcoming state highway bond. What does Ms. Watkins tell President Holmes? A. The bank cannot participate without prior approval of the MSRB. B. The bank can participate because national banks are exempt from MSRB rules. C. The bank can participate, provided it includes the contribution on its next disclosure. D. The bank cannot participate within two years of a contribution to municipal entities.

The correct answer is d. MSRB Rule G-37 Outline II W

Of the following practices, which one is NOT accepted in insurance and annuity sales? A. Reviewing insurance company ratings B. Monitoring customer complaints against insurance companies C. Verifying that personnel are properly licensed D. Churning accounts

The correct answer is d. OCC Advisory Letter 96-8 Outline IV

The OCC recommends all but one of the following actions to help prevent a national bank's purchasing or acquiring predatory or abusive loans. Which practice is NOT recommended? A. Establish policies on the bank's relationship with third-party brokers and originators B. Review loan documentation C. Audit the third-party broker D. Require the broker to establish a reserve account for legal contingencies

The correct answer is d. OCC-AL 2003-3 Outline III D

Which of the following parties is responsible for risk management of RDC activities offered by a financial institution? A. A Third Party Service Provider B. The individual RDC customer C. The Legal Department of the Bank D. The Board of Directors of the Bank

The correct answer is d. Outline I A(5) The Board of Directors has the ultimate responsibility for risk management of RDC Activities

ACME Bank would like to offer a 2.9 percent APR promotional rate for its new credit card. The rate is effective for the first six months of the account, unless the borrower makes a late payment or otherwise defaults on the credit card account. At the end of six months, or if an earlier event triggers a rate increase, the rate will increase to 15 percent APR. In order to be in compliance with the Credit Card Practices guidance, which of the following account terms does NOT need to be included in promotional materials? A. All material limitations on the applicability of the promotional rate B. The time period the rate is in effect C. Possible reasons for shortening the promotional rate period D. A typical payment that would be due at the promotional rate

The correct answer is d. Outline I B(2)(e) All of the alternatives except the payment example are required by the guidance.

Which of the following practices could a national bank implement and remain in compliance with the Credit Card Practices guidance? A. Promote a credit card with a limit ''up to $5,000'' but send the promotional materials to consumers with lower credit scores who would qualify only for a $1,000 limit B. Promote credit cards with ''up to'' limits and charge a nonrefundable annual fee of $100 per account, due with the application and before the consumer is told the actual account limit C. Raise interest rates on borrowers who default on loans to other creditors, without disclosing this practice D. Offer a promotional rate for only 90 days after the card is activated

The correct answer is d. Outline I(B)(2) and (3) All of the practices are prohibited by the guidance except for the offer of the promotional rate. The bank is able to offer a short term rate as long as it is disclosed. However, the term of the promotional rate should be fully disclosed.

To which homeowners must a bank give homeownership counseling disclosure and a Servicemembers Civil Relief Act Notice? A. All borrowers at time of application B. Only borrowers who are servicemembers C. All borrowers who are more than 45 days delinquent on their mortgage loan secured by a principal dwelling D. All borrowers who are no more than 45 days delinquent on their mortgage loan secured by a principal dwelling

The correct answer is d. Outline II A and B The counseling notice is required for all borrowers who are in default. The notice must be provided within 45 days of the default, but would not be required if the borrower cured the default by making the delinquent payment within 45 days

When may an automatically renewable time deposit account be considered for inclusion in the unclaimed property report? A. When a customer has corresponded with the bank but not made deposits to the account B. When a customer has shown interest in the account but not made deposits to the account C. When a customer does not instruct the bank in writing to roll over the account D. When the customer has not deposited or withdrawn funds from the account or another account at the same bank

The correct answer is d. Outline II A(1)Which of the following businesses would be eligible to be an exempt person under the requirements of the Bank Secrecy Act? A. Jackson's Used Cars B. Evanston Recreational Boats C. Al Williams Seafood Restaurant D. Goldsmith Aircraft Distributors

During a recent compliance examination, regulators cited the bank for violations of various marketing regulations. How should the compliance professional FIRST respond? A. Contact the bank's marketing manager to discuss the finding B. Develop a policy requiring that all marketing materials be reviewed and approved by compliance before being published C. Set up a training class for the marketing department D. Review the marketing materials and applicable regulations to verify the finding.

The correct answer is d. Outline II D(3) When a bank is cited for a regulatory violation, the compliance professional must first determine whether the bank should agree with it. This is done by reviewing the pertinent regulations and affected materials. If the citation is supported by the regulations, then the compliance manager should discuss it with the marketing manager. Solutions may include training marketing personnel or establishing new policies for reviews.

When developing a training plan for commercial lenders, which of the following regulations is least important to include? A. Equal Credit Opportunity, CFPB Regulation B B. Home Mortgage Disclosure, CFPB Regulation C C. Loans to Executive Officers, Directors, and Principal Shareholders of Member Banks, FRS Regulation O D. Truth in Lending Act, CFPB Regulation Z

The correct answer is d. Outline II E(2)(a) The compliance professional should risk manage the training program. A commercial group needs to know the rules for fair lending, HMDA, and insider lending. Regulation Z is more relevant for the consumer lending audience.

A bank's president would like to begin offering a new home equity line of credit product within two weeks. In all cases the borrower's principal dwelling will secure the loan. The president has already launched a planned advertising campaign for the bank's major service markets. What should the compliance professional do FIRST? A. Hire an attorney to write the appropriate legal documents and disclosures B. Write a memo to the president explaining why the compliance professional should have been in on the process at an earlier date C. Begin training sessions for the lending and loan operations staff on the compliance issues involved D. Perform a risk assessment to determine the bank's level of risk in offering this new product

The correct answer is d. Outline II F(4) Before going forward, the compliance professional needs to determine what level and types of risk are involved. It is possible the new product is similar to an existing product, and the new offering will not increase the bank's risk. After determining the risk, the compliance professional will know better how to proceed

State National Bank has a Web site on which it advertises all of its products. One page of the Web site is devoted to the products of its affiliate, State National Investment Products, Inc. The affiliate sells uninsured mutual funds and various other investments not insured by the FDIC. What are State National's responsibilities for this advertising? A. None. The affiliate is responsible. B. None. Because it is a Web site, the advertising rules do not apply. C. The bank must make sure the FDIC logo is properly placed. D. The bank must make sure that the noninsured disclosures are on this page and that the FDIC logo does not appear.

The correct answer is d. Outline Interagency Statement II A(7)

Which of the following bank policies does NOT comply with the Interagency Policy Statement on the Retail Sales of Nondeposit Investments? A. Supervisors and sales personnel will receive compensation based on the volume of sales each department achieves as well as the effectiveness of the department's ability to find suitable investments for customers. B. All bank employees engaged in the sale of nondeposit investments will provide the bank's required disclosures to all customers before the purchase of a nondeposit investment product. C. No teller will discuss nondeposit investment products with a bank customer. D. Tellers and new accounts personnel will receive a $25 fee for all customers referred to the nondeposit investment department on the customer's purchase of an investment product.

The correct answer is d. Outline Interagency Statement II B(7)(a) Referral fees paid to bank employees should not be based on the customer's purchase of the product. The other answers are consistent with the policy statement.

Which of the following is MOST effective in strengthening an anti-money-laundering program involving cash transactions? A. Review all deposits of $25,000 or more B. Complete CTR worksheets on all cash transactions of $5,000 or more C. Complete SAR worksheets on all cash transactions of $5,000 or more D. Monitor cash transactions of less than $10,000 for suspicious patterns

The correct answer is d. Outline XI D This is the only action that will assist the bank in detecting suspicious activity that is occurring under the $10,000 cash level. Monitoring transactions over $25,000 is probably already occurring with the bank's reporting systems. Completing worksheets for cash transactions is not as helpful as looking for patterns in the activity.

In May, a compliance officer discovers that, despite two previous warning letters, Mr. Jones has written checks drawn on his money market deposit account eight times in February, seven times in March, and seven times in April. The MOST appropriate action for the bank to take at this time is to send Mr. Jones a letter. What should the letter state? A. A service charge is being assessed for the excess transactions. B. Another type of account may better meet his needs. C. That he is approaching the transaction limitation on his money market account D. That he has exceeded his transaction limit and that another occurrence within a rolling 12-month period will result in account conversion to a demand-deposit account or other transaction account for which he is eligible.

The correct answer is d. Regulation D states that institutions must have systems to monitor transfers and procedures to contact customers who exceed the established limits on more than an occasional basis. The Fed's staff has applied a general rule that an institution may continue to consider an account an MMDA even if there are excess transfers so long as those excess transfers are not the result of an attempt to evade the transfer limits, and if the excess transfers occur in not more than three months during any 12 month period.

A bank is considering canceling its agreement with a broker to which it currently leases space in its lobby. The new plan would include an agreement with a different broker, but bank employees would complete product sales. What should the compliance manager do FIRST? A. Establish a licensing program for bank employees B. Establish a training plan for employees who will be selling the nondeposit investment products C. Obtain copies of SEC and NASD rules regarding nondeposit investment products D. Determine the additional compliance risk for the bank as a result of this change

The correct answer is d. When considering a change of practice of this magnitude, it is best to assess the compliance risk before going forward

Martha Smith of First National Bank is attempting to close a large commercial loan to a manufacturing equipment company. In negotiating the interest rate on the loan Martha states that if the company will move some of its demand accounts to the bank, it could get a lower interest rate. Is this wrong? A. Yes. It violates the anti-tying provisions. B. Yes. It is a restraint of trade. C. No, unless moving the accounts is a condition of the loan.. D. No. The bank may condition the loan on the customer placing a deposit in the bank.

The correct answer is d. Section 106(b)(1)(A) of the Bank Holding Company Act, and 12 CFR 225.7(b)(2) Outline III B(1) The bank may condition the extension of a loan on the customer placing a deposit in the bank. Anti-tying provisions stipulate that banks may not extend credit, lease or sell property, furnish services, fix, or vary consideration conditioned on the customer obtaining additional credit or service from the bank other than a loan, discount, deposit, or trust service.

For which of the following is a bank most likely to be in danger of receiving a cease and desist order? A. Repetition in a BSA examination of a noncritical deficiency reported in a previous BSA examination B. Failure to document AML training to its part-time clerical employees C. A 2 percent error rate on the bank's CTRs D. Failure to file suspicious activity reports

The correct answer is d. The 2007 Joint Statement on BSA Enforcement Outline XIV D(3) The other alternatives do not rise to the seriousness required for a cease and desist order.

In which of the following circumstances is it LEAST appropriate for a bank to file a SAR regarding Internet activity? A. Bank determines that one of its customers is the victim of identity theft B. Bank becomes aware of identity theft of its domain name (i.e., another entity selects a name similar to the bank's in order to confuse customers and obtain confidential financial information) C. Bank discovers that someone has hacked into its data system in order to obtain confidential customer data D. Bank determines through its transaction-monitoring program that a customer is making electronic transfers between his own checking and savings accounts that are just below the $10,000 reporting level

The correct answer is d. The other activity involves potential or suspected wrongdoing. The transfer of funds between an individual's own account is less suspicious because it is less likely to be a criminal act or to facilitate a criminal act.

A bank wants to generate revenue by selling banners on its Web site. Customers will be able to go to an advertiser's site by clicking on a banner on the bank's home page. Under the privacy regulations, what should the bank do? A. Revise its privacy disclosure B. Execute a confidentiality agreement with each advertiser C. Execute a joint marketing agreement with each advertiser D. Take no action, as none is required

The correct answer is d. The privacy regulations do not apply to Web links. The customer makes the choice to visit the Web page of the other party. No specific customer financial information is shared by clicking a link and visiting a site.

State National Bank is a $250 million community bank. It makes a variety of consumer and commercial loans, regularly transmits funds via wire transfers for its customers, and issues commercial and stand-by letters of credit. Which of the following transactions can State National make without checking the OFAC SDN list and without incurring liability? A. Send a wire transfer via its correspondent bank in New York for a commercial customer. B. Sell a cashier's check payable to a third party. C. Cash an on-us check over-the-counter for a noncustomer. D. None. The bank can be liable for all.

The correct answer is d. There is no limitation of liability in the OFAC regulations. If the bank pays funds to a person on the SDN list, the bank will be liable.

A bank provides several value-added services to checking account customers, such as free travel insurance provided by a nonaffiliated insurance company. Each month, the bank provides a list of customer names and addresses to the insurance company. What should be the compliance officer's GREATEST concern? A. That marketing materials clearly and conspicuously describe the travel insurance B. That consumers are aware of this valuable service so the bank retains their relationship C. That customer service representatives fully describe the features of the checking accounts D. That the bank has a written agreement with the insurance company and the bank's privacy notice accurately describes the relationship

The correct answer is d. This step is crucial to compliance with the Privacy regulation. The other steps are important in marketing the bank's services, but not in privacy compliance.

First National Bank sold several of its mortgage loans to individual investors and now services the loans for the individuals. First National Bank collects more than $600 on most of these mortgages and deposits the money into the account of the investors. At the end of each year, First National Bank sends the investors a summary of transactions on the mortgages and a detailed breakdown of the principal and interest payments made. Who is responsible for filing the mortgage interest information returns? A. The investors, because they own the loans and the money is collected for them B. The investors, because they have the necessary information from the servicer C. First National Bank, because it was the first owner of the loans D. First National Bank, because it collects the interest and has the information necessary to file the information return

The correct answer is d. Treas. Reg. Section 1.6050H-1(c)(2) Outline I B(2) A person who, in the course of trade or business, collects interest for another person is responsible for filing the information return if the initial recipient has enough information to report.

First National Bank does not have the TINs of several borrowers with mortgage loans. What should the bank do to fulfill the mortgage interest reporting regulations? A. Mail a one-time request for TINs by certified mail to each borrower who has failed to provide one B. Post a notice in its mortgage lending lobby that TINs are required for mortgage loans C. Mail a separate request for TINs annually to borrowers who have failed to provide one D. Include a request for TINs in the annual mailing of the payment coupon book

The correct answer is d. Treas. Reg. Section 1.6050H-2(f) Outline I E The bank must annually request a TIN from any mortgage interest payor who does not provide it. The mailing does not have to be separate but can be included with statements or payment coupon books.

The manager of teller operations contacts the compliance manager about a high level of exceptions noted on hold notices during recent compliance monitoring. Which of the following recommendations is MOST appropriate for the compliance manager to make? A. Require an officer's review and signature on all hold notices. B. Support the purchase of a new teller computer system to automate hold notices. C. Increase the frequency and volume of compliance monitoring to better determine the weak areas. D. Arrange remedial training on hold notice requirements for tellers where the exceptions were noted.

The correct answer is d. While the other alternatives are appropriate also, the first action should be to retrain the tellers where the exceptions were noted. Training will help immediately correct the problem. The other actions would have an effect in the long term.

Bob Richardson has had three loan applicants this morning: • Heather Smith, age 17, who needs a car loan for $9,500 for 3 years • John Bako, age 42, who would like a stock loan for $15,000 for 1 year • Maynard Williams, age 70, recently retired, who needs a $50,000 home improvement loan for 12 years Bob's bank uses a judgmental credit evaluation system. For which of these applications is Bob able to consider the age of the applicant as a factor in the decision making process? A. All of them B. None of them C. Only Mr. Williams D. Mr. Williams and Ms. Smith

The creditor may consider Ms. Smith's age to determine whether she has the capacity to enter into a contract. The creditor may consider Mr. Williams's age as it relates to another pertinent element of creditworthiness, namely, the continuation of income throughout the loan term.

First National Bank correctly issued a Good Faith Estimate within three business days of receipt of an application for a federally related mortgage loan. Which of the following reasons would not be a valid reason for re-issuing the GFE? A. Interest rate dependent charges and terms change because the rate was not locked at the time the original GFE was issued and they change when the rate is locked. B. The applicant notified First National Bank that they want to pay an additional fee in order to buy the interest rate down even further from the rate that was originally quoted in the GFE. C. First National Bank learns that the property is in a flood zone and, therefore, flood insurance must be required. Correct D. Although First National Bank ran a credit report before issuing the first GFE, they didn't look closely at it until a few days later. Now that they have, they determine that the interest rate they quoted is not adequate for the risk and re-issue the GFE showing a higher interest rate and points.

he correct answer is d. 12 CFR 1024.7(f) Outline II A(2)(g)