An unaffiliated for-profit mortgage brokerage advertises a closed-end dwelling-secured refinance using the current lender’s name and logo without identifying itself equally prominently or disclaiming association. It calls a three-year introductory rate simply “fixed” without the required ARM and adjustment disclosures, and labels its loan salesperson a “debt counselor.” Which assessment is correct?
Correct Answer
C) All three described practices violate the applicable advertising restrictions
C. Each described practice violates a separate advertising restriction. The mailer omits required identification and nonassociation disclosures when using the current lender’s name. It misrepresents the limited fixed-rate period and uses “counselor” for a for-profit mortgage salesperson. Scope and exceptions: The rule is not a blanket ban on mentioning a lender or a genuinely limited fixed period: specified prominence and proximity disclosures matter. The counselor prohibition addresses the covered for-profit mortgage roles, not every counseling service. Source: Section 1026.24(i)(1), (4), (6) — https://www.consumerfinance.gov/rules-policy/regulations/1026/24/
Why This Is the Correct Answer
C. Each described practice violates a separate advertising restriction. The mailer omits required identification and nonassociation disclosures when using the current lender’s name. It misrepresents the limited fixed-rate period and uses “counselor” for a for-profit mortgage salesperson. Scope and exceptions: The rule is not a blanket ban on mentioning a lender or a genuinely limited fixed period: specified prominence and proximity disclosures matter. The counselor prohibition addresses the covered for-profit mortgage roles, not every counseling service.
Why the Other Options Are Wrong
Option A: None is prohibited so long as the mailer carries a clear disclaimer
A generic disclaimer cannot excuse all three practices.
Option B: Only the logo is prohibited; the other 2 are matters of style
The rate description and counselor label are also regulated.
Option D: Only calling the loan fixed is prohibited, as the other 2 mislead nobody
It overlooks lender-name and counselor restrictions.
Exam Tip
Check identity, rate description and sales-role labels separately.
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