A lender with 2,000 open accounts has fraud training but no written program for spotting identity theft indicators. Assuming the lender is a covered creditor and these include covered accounts, is training alone sufficient under the Red Flags Rule?
Correct Answer
A) Deficient: a written identity theft prevention program is required
A. Training alone does not replace a written identity-theft prevention program. The stem already establishes a covered creditor with covered accounts. The program needs written procedures for identifying and detecting relevant red flags, responding to them and updating the program. Staff training supports implementation. Scope and exceptions: Program complexity should reflect the business and its risks. A low-risk covered business still needs a written program. Source: Overview; Who Must Comply; Administering Your Program; 16 CFR 681.1 — https://www.ftc.gov/business-guidance/resources/fighting-identity-theft-red-flags-rule-how-guide-business
Why This Is the Correct Answer
A. Training alone does not replace a written identity-theft prevention program. The stem already establishes a covered creditor with covered accounts. The program needs written procedures for identifying and detecting relevant red flags, responding to them and updating the program. Staff training supports implementation. Scope and exceptions: Program complexity should reflect the business and its risks. A low-risk covered business still needs a written program.
Why the Other Options Are Wrong
Option B: Sufficient: the rule reaches only institutions holding 5,000 accounts
The rule is not switched on by a 5,000-account minimum.
Option C: Deficient: the program must be filed with the regulator each year
The stated obligation is not an annual filing of the program with the regulator.
Option D: Sufficient: training covers the same ground a written program would
Training cannot substitute for the required written program.
Exam Tip
Distinguish the compliance program from one activity used to implement it.
More Federal Laws Questions
Before the team acts on a production meeting, a training manager must address SCRA Interest Rate Cap. Which response is most defensible?
A team member asks about RESPA Kickbacks and Referrals in an investor-delivery review while trying to confirm the rule-based response. Which response should the loan team use?
During a disclosure desk review, the loan team encounters an RESPA Servicing Transfer issue. Which response should avoid a shortcut that would misapply the rule?
A disciplinary-risk review raises a question about TILA APR and finance-charge rules. Which action should the renewal specialist recommend?
An MLO is reviewing procedures for a case where a compliance analyst asks why covered mortgage application data is collected. What is the proper handling?
A consumer complaint response raises a question about GLBA privacy requirements. Which action should the state compliance officer recommend?
Before the team acts on a branch training session, a policy analyst must address RESPA Servicing Transfer Notice. Which response is most defensible?
A training manager is resolving RESPA Referral Fees during an internal audit sample. Which action best fits the rule?
An operations lead is resolving ECOA Prohibited Discrimination Bases during a loan-team coaching session. Which action best fits the rule?
In a file escalation meeting, a disclosure specialist sees facts tied to TILA Closing Disclosure. What should the file reflect?
People Also Study
General Mortgage Knowledge
20% of exam
Mortgage Loan Origination Activities
27% of exam
Ethics, Fraud & Consumer Protection
18% of exam
Uniform State Test Content
11% of exam
Related Study Resources
Previous Question
A mortgage team asks a licensing coordinator about GLBA privacy requirements during a new-license application. Which answer should guide the file?
Next Question
A nonbank residential mortgage lender subject to 31 CFR 1029.210 originates 40% of its volume through eight independent brokers. Its designated anti-money-laundering compliance officer monitors employees only. Does this adequately cover the agents and brokers involved in its AML program?