A quality-control reviewer is resolving FCRA Permissible Purposes during an internal audit sample. Which action best fits the rule?
Correct Answer
A) Handle the dispute under FCRA timing and procedures
Why this is correct: The Fair Credit Reporting Act (FCRA) requires that a consumer report may only be obtained for a permissible purpose, such as a credit transaction. During an internal audit, a quality-control reviewer must ensure this rule was followed. The action "Handle the dispute under FCRA timing and procedures" is the best fit because it represents following the strict federal framework (which includes verifying permissible purpose) rather than using shortcuts or exceptions. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because FCRA's permissible purpose rule is a federal mandate. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because compliance must be proactive. "Rely on oral agreement when the rule requires documented compliance" is wrong because permissible purpose and related procedures require proper documentation. Exam tip: For FCRA, always ensure a consumer report is pulled only for a permissible purpose like a credit transaction, and follow all mandated procedures.
Why This Is the Correct Answer
The correct response is "Handle the dispute under FCRA timing and procedures" because Consumer reports require a permissible purpose and proper FCRA/Reg V handling.
Why the Other Options Are Wrong
Option B: 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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