A borrower-facing employee is unsure what to do when an MLO wants to pull a consumer report for curiosity before an application purpose exists. What is the correct response?
Correct Answer
C) Use consumer reports only for a permissible credit purpose
Why this is correct: The correct response is grounded in the Fair Credit Reporting Act (FCRA). A core principle of the FCRA is that a consumer reporting agency may furnish a consumer report only for purposes listed in the statute, such as for a legitimate credit transaction. An MLO's personal curiosity is not a permissible purpose. Therefore, the employee must ensure consumer reports are used only for a permissible credit purpose. Why the other choices are wrong: "Use a generic national checklist instead of the requirement in this file documentation check" is wrong because while checklists can aid compliance, they do not override the underlying legal requirement; the FCRA rule applies regardless of the checklist used. "Document that licensing and NMLS authority was reviewed, but take no required corrective action" is wrong because the issue is FCRA compliance, not licensing, and the required action is to not pull the report without a purpose. "Use an informal exception and leave the required record unchanged" is wrong because there are no informal exceptions to the FCRA's permissible purpose requirement. Exam tip: FCRA violations for improper pulls can lead to severe penalties. Always verify a permissible purpose exists before accessing a consumer report.
Why This Is the Correct Answer
The correct response is "Use consumer reports only for a permissible credit purpose". Consumer report use must connect to a permissible purpose, such as evaluating credit eligibility.
Why the Other Options Are Wrong
Option A: Use a generic national checklist instead of the requirement in this file documentation check.
Use a generic national checklist instead of the requirement in this file documentation check. is not correct because it bypasses the rule supported by the explanation.
Option B: Document that licensing and NMLS authority was reviewed, but take no required corrective action.
Document that licensing and NMLS authority was reviewed, but take no required corrective action. is not correct because it bypasses the rule supported by the explanation.
Option D: Use an informal exception and leave the required record unchanged.
Use an informal exception and leave the required record unchanged. is not correct because it bypasses the rule supported by the explanation.
Memory Technique
For credit report access, ask: What is the permissible purpose?
Exam Tip
For credit report access, ask: What is the permissible purpose?
Common Mistakes to Avoid
- -Access to a credit system does not create authority to pull reports casually.
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