A risk reviewer is resolving TILA APR Finance Charge during an internal audit sample. Which action best fits the rule?
Correct Answer
A) Disclose APR and finance-charge terms accurately
Why this is correct: Regulation Z (TILA) requires creditors to disclose the Annual Percentage Rate (APR) and finance charge accurately. The APR is a broader measure of credit cost than the interest rate, as it includes the finance charge and certain other costs. During an audit, the compliant action is to ensure these key terms are calculated and disclosed correctly, as inaccuracies can lead to significant liability, including borrower rescission rights. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because APR and finance charge accuracy is a core TILA requirement with no internal exception. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because compliance must be established before the audit, not in reaction to it. "Rely on oral agreement when the rule requires documented compliance" is wrong because TILA disclosures must be in writing; oral agreements do not satisfy the rule. Exam tip: Remember, the finance charge includes most costs the consumer pays to obtain credit. An inaccurate APR is a serious TILA violation.
Why This Is the Correct Answer
The correct response is "Disclose APR and finance-charge terms accurately" because Regulation Z requires accurate APR, finance-charge, disclosure, and mortgage-credit practices.
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
TILA APR and finance-charge 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 TILA APR and finance-charge 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
More Federal Laws Questions
Before the team acts on a production meeting, a training manager must address SCRA Interest Rate Cap. Which response is most defensible?
A team member asks about RESPA Kickbacks and Referrals in an investor-delivery review while trying to confirm the rule-based response. Which response should the loan team use?
During a disclosure desk review, the loan team encounters an RESPA Servicing Transfer issue. Which response should avoid a shortcut that would misapply the rule?
A disciplinary-risk review raises a question about TILA APR and finance-charge rules. Which action should the renewal specialist recommend?
An MLO is reviewing procedures for a case where a compliance analyst asks why covered mortgage application data is collected. What is the proper handling?
A consumer complaint response raises a question about GLBA privacy requirements. Which action should the state compliance officer recommend?
Before the team acts on a branch training session, a policy analyst must address RESPA Servicing Transfer Notice. Which response is most defensible?
A training manager is resolving RESPA Referral Fees during an internal audit sample. Which action best fits the rule?
An operations lead is resolving ECOA Prohibited Discrimination Bases during a loan-team coaching session. Which action best fits the rule?
In a file escalation meeting, a disclosure specialist sees facts tied to TILA Closing Disclosure. What should the file reflect?
People Also Study
General Mortgage Knowledge
20% of exam
Mortgage Loan Origination Activities
27% of exam
Ethics, Fraud & Consumer Protection
18% of exam
Uniform State Test Content
11% of exam
Related Study Resources
Previous Question
During a post-application update, a training manager encounters a Bank Secrecy Act issue. Which response should confirm the rule-based response?
Next Question
A mortgage file is paused during a secondary-market screen because of Gramm Leach Bliley Privacy Requirements. Which answer should separate the real requirement from a near-miss shortcut?