A lender requires borrowers to purchase credit insurance from a specific company as a condition of loan approval, but fails to disclose that the lender receives a commission from the insurance sales. This practice would most likely be considered:
Correct Answer
C) Both unfair and deceptive
This practice is both unfair (causing substantial injury through unnecessary costs) and deceptive (material omission of the commission arrangement). The failure to disclose the financial relationship misleads consumers, while the tied sale may cause financial harm.
Why This Is the Correct Answer
This practice is both unfair (causing substantial injury through unnecessary costs) and deceptive (material omission of the commission arrangement). The failure to disclose the financial relationship misleads consumers, while the tied sale may cause financial harm.
More Ethics & Fraud Questions
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Previous Question
A loan file shows single premium credit life insurance, mortgage disability insurance, and an auto warranty were financed into the loan amount, increasing it by $8,000. The borrower's signed disclosure shows they declined these products, but they appear in the final loan documents. This discrepancy most likely indicates:
Next Question
A borrower's mortgage broker suggests refinancing their current 5.5% loan to access equity for home improvements. The new loan has a 5.75% rate but includes a prepayment penalty, higher fees than disclosed initially, and the cash-out amount is $15,000 less than promised due to 'additional required reserves.' This situation best exemplifies: