A quality-control reviewer is resolving ECOA Fair Lending Testing during an internal audit sample. Which action best fits the rule?
Correct Answer
C) Review the policy for unlawful disparate impact
Why this is correct: ECOA Fair Lending Testing, often part of a compliance management system, involves reviewing policies and practices for discrimination. Discrimination can be overt (disparate treatment) or can result from a neutral policy that has a disproportionately negative effect on a protected class (disparate impact). A thorough review must examine both. Therefore, the action that best fits the rule is to "Review the policy for unlawful disparate impact." Why the other choices are wrong: "Apply the correct general concept to the wrong quality-control stage rather than the ECOA Fair Lending Testing rule" is wrong because it describes a procedural error, not a compliant action. "Ignore the consumer-protection issue unless the borrower complains" is wrong because fair lending laws require proactive review and correction, not a wait-for-complaint approach. "Document the issue later instead of correcting the compliance problem first" is wrong because identifying a potential disparate impact requires analysis and potential policy correction; merely documenting it later is insufficient. Exam tip: Remember that fair lending analysis looks at both intent (disparate treatment) and effect (disparate impact). A policy can be illegal even if no discriminatory intent is found.
Why This Is the Correct Answer
The correct response is "Review the policy for unlawful disparate impact" because Fair-lending review looks for discriminatory treatment, disparate impact, and redlining risks.
Why the Other Options Are Wrong
Option A: Apply the correct general concept to the wrong quality-control stage rather than the ECOA Fair Lending Testing rule.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option B: Ignore the consumer-protection issue unless the borrower complains.
Ignore the consumer-protection issue unless the borrower complains. is not correct because it does not apply the rule tested by this file scenario.
Option D: Document the issue later instead of correcting the compliance problem first.
Document the issue later instead of correcting the compliance problem first. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
fair-lending enforcement risk: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
Match the file facts to fair-lending enforcement risk; do not choose an exception or shortcut that skips the required rule.
Common Mistakes to Avoid
- -Choosing an internal exception instead of the governing rule
- -Treating preliminary or informal facts as a substitute for required documentation
- -Answering from a familiar but unrelated mortgage topic
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