A $264,000 application lists an address the credit report has never shown in 7 years, and the report carries a fraud alert asking that identity be verified by phone. What identity-verification step should the originator take in response to the fraud alert?
Correct Answer
B) Follow the fraud-alert verification process and confirm the consumer’s identity before granting new credit
B. Verify identity rather than ignoring the alert or automatically denying credit. The FTC distinguishes an alert from a freeze: an alert calls for identity checks before granting new credit. The unfamiliar address merits investigation but does not establish impersonation. Follow the applicable alert procedure rather than trusting an unverified callback number. Scope and exceptions: This tests the common verification principle, not every distinction between initial and extended alerts or a ban on preliminary processing. Source: What To Know About Fraud Alerts — https://consumer.ftc.gov/articles/credit-freezes-and-fraud-alerts
Why This Is the Correct Answer
B. Verify identity rather than ignoring the alert or automatically denying credit. The FTC distinguishes an alert from a freeze: an alert calls for identity checks before granting new credit. The unfamiliar address merits investigation but does not establish impersonation. Follow the applicable alert procedure rather than trusting an unverified callback number. Scope and exceptions: This tests the common verification principle, not every distinction between initial and extended alerts or a ban on preliminary processing.
Why the Other Options Are Wrong
Option A: Proceed and note the discrepancy for the post-closing quality review
Post-closing review would come after credit was granted.
Option C: Ignore the alert, since the applicant produced a valid photo identity card
A photo card does not justify bypassing the alert.
Option D: Decline the application, because a fraud alert makes the file ineligible
An alert is not automatic disqualification.
Exam Tip
Investigate an identity warning; do not treat it as proof of fraud.
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