An MLO is reviewing procedures for a case where an MLO wants to pull a consumer report for curiosity before an application purpose exists. What is the proper handling?
Correct Answer
A) Use consumer reports only for a permissible credit purpose
Why this is correct: The fundamental rule from the FCRA and Regulation V is that a consumer report can only be obtained for a permissible purpose. The scenario describes an action (pulling a report for curiosity) that lacks such a purpose. Therefore, the proper handling is to use consumer reports only for a permissible credit purpose. Why the other choices are wrong: "Apply the rule only after a regulator asks specifically about licensing and NMLS authority" is wrong because the FCRA rule applies independently of regulatory inquiry. "Treat the rule as waived because all parties want the file to move faster" is wrong because parties cannot waive federal consumer protection laws. "Assume another jurisdiction approval automatically cures this file" is wrong because approval from another jurisdiction does not address the FCRA violation in this file. Exam tip: The FCRA's permissible purpose rule is a strict liability standard. Good intentions or operational speed are not defenses.
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 B: Apply the rule only after a regulator asks specifically about licensing and NMLS authority.
Apply the rule only after a regulator asks specifically about licensing and NMLS authority. is not correct because it bypasses the rule supported by the explanation.
Option C: 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 D: 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.
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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