A compliance review finds that an MLO wants to pull a consumer report for curiosity before an application purpose exists. What should the MLO do next?
Correct Answer
B) Use consumer reports only for a permissible credit purpose
Why this is correct: The Fair Credit Reporting Act (FCRA) and Regulation V (12 CFR Part 1022) mandate that a consumer report may only be accessed for a permissible purpose. A permissible purpose includes use in connection with a credit transaction initiated by the consumer. Since no application purpose exists, pulling the report for curiosity is not permitted. The MLO must refrain from pulling the report unless and until a permissible purpose arises. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because the FCRA's permissible purpose rule is a federal mandate; internal exceptions are invalid. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because FCRA compliance is required at the time of action (pulling the report), not retroactively after a regulator inquiry. "Rely on oral agreement when the rule requires documented compliance" is wrong because the FCRA requirement is a precondition for action (a lawful purpose); an oral agreement cannot satisfy this. Exam tip: The FCRA's "permissible purpose" is a gatekeeper rule. No purpose, no pull.
Why This Is the Correct Answer
The correct response is "Use consumer reports only for a permissible credit purpose" because Lines 76-80; 12 CFR Part 1022 summary.
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: 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
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