A processor asks how to handle a file where an outside party asks for borrower bank statements without a permissible basis. Which response is most accurate?
Correct Answer
C) Follow privacy limits before sharing nonpublic personal information
Why this is correct: The correct action is rooted in federal privacy law (12 CFR Part 1016). Borrower bank statements are classic examples of nonpublic personal information (NPI). The MLO must adhere to the institution's privacy policy and the limits of the GLBA, which restrict sharing NPI with outside parties unless an exception applies. A request without a permissible basis must be refused, and the MLO must follow the established privacy limits. Why the other choices are wrong: "Treat the rule as waived because all parties want the file to move faster" is wrong because regulatory privacy protections cannot be waived for convenience. "Assume another jurisdiction approval automatically cures this file" is wrong because privacy law compliance is specific to the action of sharing information; approval in another area (like licensing) is irrelevant. "Handle records, reports, and required notices with a sales script rather than the required file action" is wrong because using a script does not substitute for the substantive action of protecting NPI as required by law. Exam tip: Privacy compliance is non-negotiable. Speed, convenience, or other approvals are never valid excuses for sharing NPI improperly.
Why This Is the Correct Answer
The correct response is "Follow privacy limits before sharing nonpublic personal information". Borrower nonpublic personal information is subject to privacy notices and sharing limits.
Why the Other Options Are Wrong
Option A: Treat the rule as waived because all parties want the file to move faster.
Treat the rule as waived because all parties want the file to move faster. is not correct because it bypasses the rule supported by the explanation.
Option B: Assume another jurisdiction approval automatically cures this file.
Assume another jurisdiction approval automatically cures this file. is not correct because it bypasses the rule supported by the explanation.
Option D: Handle records, reports, and required notices with a sales script rather than the required file action.
Handle records, reports, and required notices with a sales script rather than the required file action. is not correct because it bypasses the rule supported by the explanation.
Memory Technique
Outside party plus borrower data means pause and verify authority.
Exam Tip
Outside party plus borrower data means pause and verify authority.
Common Mistakes to Avoid
- -Closing a loan does not remove privacy duties for borrower information.
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At closing, an MLO adds a single-premium credit-life policy to the loan amount even though the borrower declined it and the policy is not required for approval. Which practice is the clearest concern?
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