A team member asks about FCRA Dispute Procedures in a compliance desk review while trying to select the answer that fits the governing requirement. Which response should an audit analyst use?
Correct Answer
D) Use the report only for a permissible credit purpose
Why this is correct: The Fair Credit Reporting Act (FCRA) and its implementing Regulation V strictly govern the use of consumer reports. The core requirement is that a user must have a "permissible purpose" under the law, such as for a credit transaction, before obtaining or using a consumer report. The correct choice, "Use the report only for a permissible credit purpose," directly states this fundamental FCRA compliance obligation. Why the other choices are wrong: "Use prior branch licensing approval as a substitute for the current FCRA Dispute Procedures requirement" is wrong because state licensing does not override specific federal FCRA requirements. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because compliance must be proactive, not reactive. "Rely on oral agreement when the rule requires documented compliance" is wrong because FCRA procedures require proper documentation, not verbal assurances. Exam tip: For FCRA questions, always anchor on "permissible purpose" as the first and most critical step for using any consumer report.
Why This Is the Correct Answer
The correct response is "Use the report only for a permissible credit purpose" because Consumer reports require a permissible purpose and proper FCRA/Reg V handling.
Why the Other Options Are Wrong
Option A: Use prior branch licensing approval as a substitute for the current FCRA Dispute Procedures requirement.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option B: Wait until a regulator asks for the file before applying the federal requirement.
Wait until a regulator asks for the file before applying the federal requirement. is not correct because it does not apply the rule tested by this file scenario.
Option C: Rely on oral agreement when the rule requires documented compliance.
Rely on oral agreement when the rule requires documented compliance. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
FCRA credit-reporting rules: 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 FCRA credit-reporting rules; 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
More Federal Laws Questions
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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?
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