An advertising approval raises a question about fair-lending controls. Which action should the branch supervisor recommend?
Correct Answer
A) Do not discourage applicants on a prohibited basis
Why this is correct: The Equal Credit Opportunity Act (ECOA) prohibits discrimination in any aspect of a credit transaction on a prohibited basis (e.g., race, color, religion, national origin, sex, marital status, age). Fair-lending controls in advertising must ensure that marketing does not unlawfully discourage potential applicants from these protected groups. "Do not discourage applicants on a prohibited basis" is the core fair-lending principle that must guide advertising approval. Why the other choices are wrong: "Continue the activity because the borrower appears willing to proceed" is wrong because fair lending protects potential applicants, not just existing borrowers, and discouragement can occur before application. "Delay the ECOA Disparate Impact step until a later consumer complaint review" is wrong because fair-lending reviews must be proactive; waiting for a complaint is a compliance failure. "Document the issue later instead of correcting the compliance problem first" is wrong because if an ad discourages a protected class, it must be corrected immediately, not just documented. Exam tip: In fair lending, the focus is on preventing discouragement and ensuring equal access. Proactive correction is required.
Why This Is the Correct Answer
The correct response is "Do not discourage applicants on a prohibited basis" because Fair lending requires equal treatment and credit-related standards without prohibited-basis discrimination.
Why the Other Options Are Wrong
Option B: Continue the activity because the borrower appears willing to proceed.
Continue the activity because the borrower appears willing to proceed. is not correct because it does not apply the rule tested by this file scenario.
Option C: Delay the ECOA Disparate Impact step until a later consumer complaint review instead of acting now.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
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 controls: 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 controls; 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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