A branch manager asks about a loan file because marketing proposes a rate the company is not prepared to offer. What should happen?
Correct Answer
A) Advertise only credit terms actually available
Why this is correct: The rule under Regulation Z (12 CFR 1026.24(a)) is clear: any specific credit term advertised in a mortgage context must be a term the creditor is prepared to offer. If marketing proposes an unavailable rate, it creates a deceptive advertisement. The branch manager must ensure compliance by directing that advertising reflect only terms that are actually available. Why the other choices are wrong: "Treat prior mortgage experience as a substitute for the required compliance condition" is wrong because experience does not override specific regulatory requirements. "Use a generic national checklist instead of the requirement in this staff training note" is wrong because checklists must incorporate all applicable rules, including this specific advertising mandate. "Document that advertising and consumer protection was reviewed, but take no required corrective action" is wrong because merely documenting a known violation without fixing it is non-compliant. Exam tip: When a proposed action violates a clear rule (like advertising real rates), the answer is always to stop the violation and adhere to the rule, not to find workarounds.
Why This Is the Correct Answer
The correct response is "Advertise only credit terms actually available". Specific advertised terms must be terms the creditor actually is or will be prepared to offer.
Why the Other Options Are Wrong
Option B: Treat prior mortgage experience as a substitute for the required compliance condition.
Treat prior mortgage experience as a substitute for the required compliance condition. is not correct because it bypasses the rule supported by the explanation.
Option C: Use a generic national checklist instead of the requirement in this staff training note.
Use a generic national checklist instead of the requirement in this staff training note. is not correct because it bypasses the rule supported by the explanation.
Option D: Document that advertising and consumer protection was reviewed, but take no required corrective action.
Document that advertising and consumer protection was reviewed, but take no required corrective action. is not correct because it bypasses the rule supported by the explanation.
Memory Technique
For advertising, ask whether the exact term is real and available.
Exam Tip
For advertising, ask whether the exact term is real and available.
Common Mistakes to Avoid
- -A disclaimer does not cure a term that is not actually available.
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