An advertising approval raises a question about ECOA and Regulation B. Which action should the loan file reviewer recommend?
Correct Answer
B) Send the required adverse-action notice
Why this is correct: The Equal Credit Opportunity Act (ECOA) and its implementing Regulation B require creditors to provide an adverse action notice when an application is denied, incomplete, or withdrawn. This notice must be in writing, contain specific reasons, and be sent within 30 days. The correct answer, "Send the required adverse-action notice," is the direct, mandatory action to resolve an ECOA issue. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because federal adverse action notice requirements cannot be bypassed by internal policy. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because compliance is proactive and required at the time of the adverse action. "Resolve the ECOA Adverse Action Notice issue with the high-cost loan exception that does not fit the facts" is wrong because high-cost loan rules (like HOEPA) are separate from ECOA's adverse action requirements; applying an irrelevant exception is non-compliant. Exam tip: For ECOA, think "notice and reasons" for any adverse action. The requirement is triggered by the action on the application, not by a regulator's inquiry.
Why This Is the Correct Answer
The correct response is "Send the required adverse-action notice" because ECOA/Regulation B prohibits discrimination and requires action notices and valuation copies.
Why the Other Options Are Wrong
Option A: Use an internal exception instead of the required federal disclosure or timing rule.
Use an internal exception instead of the required federal disclosure or timing rule. is not correct because it does not apply the rule tested by this file scenario.
Option C: 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 D: Resolve the ECOA Adverse Action Notice issue with the high-cost loan exception that does not fit the facts.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Memory Technique
ECOA and Regulation B: 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 ECOA and Regulation B; 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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