A lender uses a consumer report to grant a personal-purpose mortgage secured by a one-unit residence. Its terms are materially less favorable than the best terms available to a substantial proportion of comparable customers. The consumer accepts. Apart from a qualifying credit-score disclosure exception, assume no exception applies. Which notice requirement addresses this pricing?
Correct Answer
B) A risk-based pricing notice, unless the applicable mortgage credit-score disclosure exception is satisfied
B. Apply the risk-based pricing requirement or a fully satisfied applicable exception. Approval does not eliminate the notice triggered by report-based, materially less favorable terms. For this residential mortgage, the relevant score-disclosure exception is section 1022.74(d), not the other-credit provision in (e). Scope and exceptions: The exception requires the prescribed notice, form and timing; merely showing a score is insufficient. Do not invent a universal 1.4-percentage-point trigger. Adverse action and its notice exception must be evaluated on their own facts. Source: Section 1022.72(a)–(b) — https://www.consumerfinance.gov/rules-policy/regulations/1022/72/ Section 1022.74(b), (d) and (e) — https://www.consumerfinance.gov/rules-policy/regulations/1022/74/
Why This Is the Correct Answer
B. Apply the risk-based pricing requirement or a fully satisfied applicable exception. Approval does not eliminate the notice triggered by report-based, materially less favorable terms. For this residential mortgage, the relevant score-disclosure exception is section 1022.74(d), not the other-credit provision in (e). Scope and exceptions: The exception requires the prescribed notice, form and timing; merely showing a score is insufficient. Do not invent a universal 1.4-percentage-point trigger. Adverse action and its notice exception must be evaluated on their own facts.
Why the Other Options Are Wrong
Option A: No notice is owed, because the borrower was approved rather than declined
Approval is not a general exemption.
Option C: No notice is owed where the borrower accepts the terms in writing
Accepting the terms does not itself waive this notice.
Option D: An adverse action notice is owed instead, since the pricing is worse
Worse pricing alone does not establish the asserted adverse-action notice obligation.
Exam Tip
Identify the transaction and satisfy the entire notice exception, not just one disclosure element.
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