A mortgage team asks a branch supervisor about TILA APR and finance-charge rules during a renewal checklist. Which answer should guide the file?
Correct Answer
B) Base the answer on the covered-credit disclosure rule
Why this is correct: The question asks for guidance on TILA APR and finance-charge rules. The Truth in Lending Act (TILA), implemented by Regulation Z, is the primary federal law governing consumer credit disclosures. Its rules on APR, finance charges, and disclosures are mandatory for covered transactions. Therefore, the correct action is to base the answer on the covered-credit disclosure rule, as it directly references the applicable federal legal standard. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because internal policies cannot override or replace mandatory federal disclosure requirements. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because compliance with TILA is required at the time of the transaction, not retroactively upon inquiry. "Rely on oral agreement when the rule requires documented compliance" is wrong because TILA and Regulation Z specifically require disclosures to be provided in writing to the consumer. Exam tip: For TILA/Reg Z questions, remember that its disclosure rules are mandatory and preempt less strict standards. The correct answer will always prioritize following the federal rule.
Why This Is the Correct Answer
The correct response is "Base the answer on the covered-credit disclosure rule" because Regulation Z requires accurate APR, finance-charge, disclosure, and mortgage-credit practices.
Why the Other Options Are Wrong
Option A: 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
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