In a closing-readiness check, the MLO sees facts tied to FCRA Credit Reporting. What should the file reflect?
Correct Answer
D) Use the report only for a permissible credit purpose
Why this is correct: The Fair Credit Reporting Act (FCRA) strictly regulates the use of consumer credit reports. A core principle is that a creditor may only obtain and use a consumer report for a "permissible purpose." In the mortgage context, the permissible purpose is to evaluate a consumer's application for credit. The file must reflect that the report was used solely for this authorized credit transaction. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because FCRA requirements are federal law and cannot be bypassed by internal policy. "Assume the FCRA Credit Reporting condition is met because the borrower satisfied the separate advertising disclosure requirement" is wrong because compliance with one rule (e.g., advertising) does not satisfy the distinct FCRA requirement for permissible purpose. "Rely on oral agreement when the rule requires documented compliance" is wrong because FCRA compliance, such as obtaining consumer consent or providing adverse action notices, requires proper documentation. Exam tip: FCRA's "permissible purpose" is fundamental. For mortgage lending, the purpose is the credit transaction itself. Any other use is a violation.
Why This Is the Correct Answer
The correct response is "Use the report only for a permissible credit purpose" because Consumer reports require a permissible purpose and proper FCRA/Reg V handling.
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 B: Assume the FCRA Credit Reporting condition is met because the borrower satisfied the separate advertising disclosure requirement.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option C: 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
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
A lender establishes a customer relationship with a borrower at consummation on 4 June and plans to send its privacy notice with the first statement in July. Assuming no exception permits later delivery, does sending the initial privacy notice with the July statement meet the GLBA timing requirement?
Next Question
Before the loan advances, a quality-control reviewer must resolve a RESPA servicing and affiliated-business rules issue in an annual compliance meeting. What should happen?