Equal Credit Opportunity Act (ECOA) / Regulation B - CRCM Study Guide
True or False. Action must not be intentionally discriminatory in order to be covered under ECOA?
True
Credit scoring systems must be ___ derived and ___ sound.
empirically, statistically
Effects test for ECOA - discrimination occurs when a creditor's action causes _________, ________ impact on ______ _______
...disproportionate, unfavorable, protected classes.
ECOA covers which types of credit?
1) Consumer Credit 2) Business Credit
Name the three step process for ECOA effects test under ECOA.
1) Consumer proves disproportionate adverse action 2) Creditor proves relationship between practice and creditworthiness 3) Consumer must show alternate policy or practice can achieve same result without adverse effect
A creditor must request the following monitoring information when an applicant submits an application to purchase a primary dwelling? (4 pieces of information)
1) Ethnicity and Race 2) Sex 3) Marital Status 4) Age
A notice of incompleteness must include the following 3 pieces of information.
1) Information needed 2) Timeframe for when information needs to be provided 3) Inform applicant that not receiving information will result in no further considertion
What are the 4 elements that define an adverse action?
1) Not granting credit in amount or terms requested unless creditor makes counteroffer that is accepted by applicant. 2) Termination of account or unfavorable change in terms of account, unless change affects all other of lender's accounts 3) Refusal to increase amount of credit when requested 4) A counteroffer to grant credit that is rejected by the applicant
What 5 pieces of information may a creditor collect for self-testing purposes?
1) Race 2) Color 3) Religion 4) National Origin 5) Sex
Name the 9 bases identified in ECOA regarding prohibited discrimination
1) Race 2) Sex 3) Marital Status 4) Color 5) Religion 6) National Origin 7) Age 8) Recipient of Public Assistance 9) Exercising Rights under Consumer Credit Act
When may information be requested about a current or former spouse? (4 instances).
1) Spouse permitted to use account or be contractually liable 2) Applicant relying on spouse's income for credit or relying on payments from the spouse (child support, alimony, etc.) 3) Applicant in community property state 4) Property securing credit is in community property state
The content of a notification to consumers must include these 5 pieces of information:
1) Statement of action taken 2) Name and address of creditor 3) ECOA notice 4) Name and address of federal agency that administers creditor's compliance with ECOA 5) Statement of specific reasons or disclosure for consumer's rights to receive specific reasons for adverse action
Creditors must have record retention of ____ months for all applications from time of action being taken. For business loans, the record retention is ___ months for companies with gross revenue of $1 million or less. For business loans, the record retention is ____ months for companies with gross revenue of more than $1 million unless the applicant requests reasons for action taken. The record retention period must then be ___ months.
25 12 months 2 months (60 days), 12 months
Appraisals and written valuations must be provided upon completion or within ___ ___ days prior to consummation. Whichever is earlier (closed-end). For open-end credit, they must be provided at ___ ___.
3 business days, account opening
A creditor must notify an applicant of action taken within ___ days of receiving a completed application.
30
A creditor must notify an applicant within ___ days of taking adverse action on an existing account.
30
A creditor must notify an applicant within ___ days of taking adverse action on incomplete application.
30
For business's with gross revenue of $1 million or less in preceding fiscal year, the creditor must disclose the applicant's right to have reasons for denial within ___ days.
30
Creditors have ___ days to send applicants with incomplete applications one of the following notices.
30 days. Notice of action taken or notice of incompleteness.
For business's with gross revenue of more than $1 million in preceding fiscal year, the creditor must disclose the applicant's right to have reasons for denial within ___ days.
60
What is the age for an applicant to be considered "elderly?"
62 or older
A creditor must notify an applicant within ___ days of making a counteroffer that is not expressly accepted.
90
When is the only time a credit may ask about marital status for credit that is individual and unsecured?
Applicant is in community property state or relying on a property located in a community property state as basis for repayment.
What is the definition of an application under ECOA?
Application is a written or oral request for credit aligned with a creditor's process for a credit request.
What must a creditor do and inform the consumer they will do if the consumer refuses to provide the government monitoring information requested?
Creditor will note information on the basis of visual observation or surname.
True or False: ECOA does not mention that a creditor cannot advertise in a way that would discourage applications on a prohibited basis.
False
True or False: A creditor may not inquire about immigration or permanent residence status.
False.
True or False: A creditor may require a guarantor or co-signer be the spouse.
False.
What kind of loans require that an application be written?
Loans to purchase or refinance a principal dwelling or secured by a dwelling.
If the application is for other than individual, unsecured credit, creditor may ask for marital status information using only what three terms?
Married, not married, or seperated
True or False: A creditor may consider age as it relates to another element of creditworthiness, such as time until retirement or whether applicant will have income for repayment.
True
True or False: A creditor may consider length of time public assistance will be received, whether application will continue to quality for public assistance, or whether income can be garnished.
True
True or False: A creditor may consider whether an applicant is old enough to enter into a contract.
True
True or False: A creditor may favorably consider applicants who are "elderly."
True
True or False: A creditor may request any information in a credit transaction so long as it is not prohibited under Regulation B.
True
True or False: A creditor may solicit from traditionally disadvantaged groups.
True
True or False: A creditor must provide an applicant with a copy of all appraisals or written valuations developed in connection with an application for credit to be secured by a first lien on a dwelling.
True
True or False: Any information entered into and retained in a computer system is considered an application under ECOA?
True
True or False: Disclosures can be in any language so long as English copies can be provided as requested.
True
True or False: If applicant requests secured credit, a creditor may require a spouses' signature on any document necessary to make collateral available in event of default.
True
True or False: Statements that the applicant did not meet lender's credit standards, did not meet internal credit policy, or did not have a high enough credit score are not sufficient enough for a statement of specific reasons.
True
When is an application considered completed under ECOA
When a creditor has received the information it regularly considers in evaluation.
Is a creditor required to request monitoring information for certain dwelling-secured loan applications? (Yes/No)
Yes.
A _____ _____ _____ must exist that cannot be achieved via alternate method with less disparate impact for a process to not be considered a violation against ECOA.
legitimate business need
Creditors may collect information for self-testing purposes on what type of loans, so long as their program meets Regulation B.'s standard?
non-mortgage loans
Disclosures for ECOA must be in a form ___ ____ ___ ___ (4 words).
the consumer can keep.
