Two products fit the borrower. Product A pays the branch 1.9% and product B pays 1.1%. A costs the borrower $2,300 more over the time she plans to stay. How should the originator present the options without steering the borrower based on the branch's higher compensation?
Correct Answer
D) Present both with the $2,300 difference shown, and let her choose
D. Give a balanced comparison rather than favoring compensation. Explain the stated $2,300 cost difference together with relevant benefits and risks. A higher commission does not establish that A serves the borrower’s interests. Disclosing that commission does not justify a compensation-driven recommendation. Scope and exceptions: This is a comparison exercise, not proof of the regulatory safe harbor or every compensation rule. Section 1026.36(e)(1) addresses consummated transactions; its interpretation requires comparing available offers for which the borrower likely qualifies. Source: 1026.36(e)(1); interpretations 36(e)(1)-1 and -2 — https://www.consumerfinance.gov/rules-policy/regulations/1026/36/
Why This Is the Correct Answer
D. Give a balanced comparison rather than favoring compensation. Explain the stated $2,300 cost difference together with relevant benefits and risks. A higher commission does not establish that A serves the borrower’s interests. Disclosing that commission does not justify a compensation-driven recommendation. Scope and exceptions: This is a comparison exercise, not proof of the regulatory safe harbor or every compensation rule. Section 1026.36(e)(1) addresses consummated transactions; its interpretation requires comparing available offers for which the borrower likely qualifies.
Why the Other Options Are Wrong
Option A: Present B only, because the cheaper product is always the right one
Cheapest alone does not establish best fit in every case.
Option B: Present A, since a higher-paying product keeps the branch open
Branch revenue is not a borrower-interest rationale.
Option C: Present both but recommend A, disclosing the 1.9% compensation
Disclosure does not cure the stated compensation motive.
Exam Tip
Compare borrower outcomes, not just originator revenue.
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