A compliance review finds that an outside party asks for borrower bank statements without a permissible basis. What should the MLO do next?
Correct Answer
B) Follow privacy limits before sharing nonpublic personal information
Why this is correct: The governing concept is the Gramm-Leach-Bliley Act (GLBA) and its implementing Regulation P (12 CFR Part 1016). These laws protect consumers' nonpublic personal information (NPI), such as bank statements. An MLO must follow established privacy limits, which include providing initial and annual privacy notices and limiting sharing of NPI to circumstances described in those notices or as otherwise permitted by law. A request without a permissible basis must be denied. Why the other choices are wrong: "Continue the activity because the borrower appears willing to proceed" is wrong because consumer consent must be informed and obtained under the specific procedures outlined in the privacy rules, not assumed from general willingness. "Ignore the consumer-protection issue unless the borrower complains" is wrong because privacy protection is a proactive duty of the financial institution. "Assume the Handling personal information and privacy condition is met because the borrower satisfied the separate advertising disclosure requirement" is wrong because compliance areas are distinct; meeting one requirement (advertising) does not satisfy an unrelated one (privacy). Exam tip: Privacy rules are triggered by "nonpublic personal information." When in doubt, do not share without verifying a permissible purpose under your privacy policy or law.
Why This Is the Correct Answer
The correct response is "Follow privacy limits before sharing nonpublic personal information" because Lines 273-277; 12 CFR Part 1016 summary and Subparts A-B.
Why the Other Options Are Wrong
Option A: Continue the activity because the borrower appears willing to proceed.
Continue the activity because the borrower appears willing to proceed. is not correct because it does not apply the rule tested by this file scenario.
Option C: Ignore the consumer-protection issue unless the borrower complains.
Ignore the consumer-protection issue unless the borrower complains. is not correct because it does not apply the rule tested by this file scenario.
Option D: Assume the Handling personal information and privacy 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.
Memory Technique
borrower privacy and confidentiality: 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 borrower privacy and confidentiality; 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 Ethics & Fraud Questions
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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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